Does working capital management impact an enterprise’s profitability? Evidence from selected Nigerian firms

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This study examined the impact of working capital management on the profitability of selected quoted agricultural and agro-allied companies (from 2012 to 2016) in Nigeria. Secondary data were extracted from eighteen quoted agricultural and agro-allied companies in Nigeria, four of which are agricultural companies out of the twenty-three in Nigeria. Descriptive research design and regression analysis were used. Working capital management was measured using the trade receivables collection period, trade payables, payment period, inventory turnover period, and cash conversion cycle, while profit before interest and tax measured profitability. This study found that working capital management and profitability are related to the agriculture and agro-allied sector in Nigeria. The result shows the trade receivables collection period and profitability are negatively related. The result also shows the trade payables payment period and profitability are positively related. The result shows that the inventory turnover period and profitability are related, the cash conversion cycle and profitability are positively related. The conclusion is that working capital management and profitability are related. If the management of firms takes efficient and effective decisions in managing the company’s working capital, all things being equal, the maximization of the firm’s profitability, value, and shareholders’ wealth can be guaranteed. Consequently, agency costs asserted by agency theory would be eliminated automatically.

Acknowledgment
All researchers and non-researchers that contributed to this paper are highly appreciated.

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    • Table 1. Descriptive statistics of variables under the model analysis
    • Table 2. Regression analysis result
    • Conceptualization
      Adegbola Olubukola Otekunrin, Johnson Kolawole Olowookere, Oladipo Adenike
    • Data curation
      Adegbola Olubukola Otekunrin, Johnson Kolawole Olowookere, Oladipo Adenike
    • Formal Analysis
      Adegbola Olubukola Otekunrin, Johnson Kolawole Olowookere, Oladipo Adenike
    • Project administration
      Adegbola Olubukola Otekunrin, Tony Ikechukwu Nwanji, Johnson Kolawole Olowookere, Oladipo Adenike
    • Supervision
      Adegbola Olubukola Otekunrin, Oladipo Adenike
    • Validation
      Adegbola Olubukola Otekunrin, Johnson Kolawole Olowookere, Oladipo Adenike
    • Visualization
      Adegbola Olubukola Otekunrin, Johnson Kolawole Olowookere
    • Writing – review & editing
      Adegbola Olubukola Otekunrin, Tony Ikechukwu Nwanji, Gabriel Damilola Fagboro, Oladipo Adenike
    • Funding acquisition
      Tony Ikechukwu Nwanji, Gabriel Damilola Fagboro, Johnson Kolawole Olowookere, Oladipo Adenike
    • Resources
      Tony Ikechukwu Nwanji, Gabriel Damilola Fagboro, Oladipo Adenike
    • Methodology
      Gabriel Damilola Fagboro, Oladipo Adenike
    • Investigation
      Johnson Kolawole Olowookere, Oladipo Adenike
    • Writing – original draft
      Johnson Kolawole Olowookere, Oladipo Adenike
    • Software
      Johnson Kolawole Olowookere, Oladipo Adenike