WORKING CAPITAL MANAGEMENT AND FINANCIAL PERFORMANCE: EVIDENCE FROM SELECTED NIGERIAN MANUFACTURING FIRMS

Abstract

The aim of this study was to determine the relationship between components of working capital and financial performance of selected Nigerian manufacturing firms. The ex-post facto research design was adopted and six companies were purposively selected for the period 2013-2020. Data was collected from the annual reports and accounts of the sampled companies and tested by means of fixed and random effects panel data estimation tool. Findings indicated that average payment period had a significant positive relationship with return on investments, while inventory turnover period had a significant negative relationship with return on investments. Also, average collection period had a significant negative relationship with return on investments. Given the findings, it was concluded that working capital management significantly influence financial performance of manufacturing companies. The study therefore recommends that manufacturing companies should ensure optimal mix of working capital proxies in order to optimize financial performance.