Evaluating the influence of working capital management on corporate performance
1 College of Business, Auburn University, USA.
2 Leadway Pensure PFA, Lagos, Nigeria.
3 Skillmatch Limited, Lagos, Nigeria.
4 Department of Project Management, Northeastern University, Portland USA.
Research Article
World Journal of Advanced Research and Reviews, 2024, 22(03), 2030–2037
Publication history:
Received on 21 May 2024; revised on 28 June 2024; accepted on 30 June 2024
Abstract:
Effective working capital management involves strategically managing short-term assets and liabilities to maintain financial stability. This includes managing cash, inventory, accounts receivable, and accounts payable. Optimizing cash conversion, timely payment collection, avoiding excess stock, and managing accounts payable ensure liquidity, minimize financing costs, and improve profitability. Studying the impact of working capital management on the financial performance of consumer goods firms is crucial, as it provides insights into how these practices can enhance profitability and support sustainable growth in a competitive sector. Understanding these dynamics helps firms refine their strategies to achieve better financial health and operational efficiency. This study investigates the impact of working capital management on the financial performance of listed consumer goods firms in Nigeria, highlighting the significance of optimizing cash flow and balancing current assets and liabilities. By focusing on the cash conversion cycle, accounts receivable turnover, and inventory turnover, the research evaluates their effects on return on assets (ROA) using ordinary least square regression (OLS) analysis. The findings aim to provide insights into how strategic management of working capital components can enhance profitability and contribute to sustainable business growth. By analyzing financial data from listed companies, the study offers empirical evidence that effective working capital management through maintaining optimal levels of receivables, inventory, and payables supports smoother operations, reduces financing costs, and increases ROA. This research underscores the strategic importance of working capital management in achieving financial stability and operational efficiency, with implications for both practitioners and academics in the Nigerian context.
Keywords:
Working Capital Management; Financial Performance; Manufacturing firm; Cash conversion cycle; Account Receivables turnover
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Copyright © 2024 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution Liscense 4.0