Nigerian Journal of Banking and Financial Issues (NJBFI)

WORKING CAPITAL MANAGEMENT AND THE PROFITABILITY OF SELECTED CONSUMER GOODS SECTOR IN NIGERIA

Abstract

This study investigated the effect of working capital management on the profitability of selected consumer goods companies in Nigeria, with a particular emphasis on the roles of Debtors Collection Period (DCP), Stock Conversion Period (SCP), Creditors Payment Period (CPP), and Cash Conversion Cycle (CCC) in shaping firm profitability. Relying on secondary data sourced from audited financial statements of the selected firms covering the period from 2019 to 2024, the research applied Generalized Least Squares (GLS) panel regression analysis based on the outcome of the Hausman specification test, using STATA 13 for the analysis. The results showed that all components of working capital management (DCP, SCP, CPP, and CCC) had a significant influence on profitability. This suggests that effective management of these components positively impacts firm performance, whereas inefficient practices can hinder profitability. The study concluded that firms with strong working capital strategies perform better than those with weaker systems. It recommended, among other measures, that Nigerian firms regularly evaluate their debtor collection systems to promote timely debt recovery, improve liquidity, and maintain smooth operations.