WORKING CAPITAL MANAGEMENT INDICATORS AND FINANCIAL PERFORMANCE OF NON-FINANCIAL FIRMS LISTED ON NIGERIAN EXCHANGE GROUP

Abstract

Working capital management is the engine of the business, so indicators are pointers to financial crisis and liquidity of firms. This study analyzed   the effect of working capital management indicators on financial performance of non-financial firms listed on Nigerian Exchange Group for the period, 2008-2022. The indicators used were cash conversion cycle, Net liquid balance and Working capital requirements. The research adopted the ex-post facto, with secondary data obtained from annual reports of the sixteen (16) selected firms.  With the use of Feasible generalized least squares (FGLS) regression analysis, the hypotheses were subjected to test and showed that, Net liquid balance, Cash conversion cycle and Working capital requirement had a significant effect on Return on assets and Return on equity.  The study noted that the coefficients of Net liquid balance and Working capital requirement added more value to the Return on assets and Return on equity, more than Cash conversion cycle and then recommended that to enhance the Return on Assets and Return on Equity, non-financial firms should focus on the use of Net Liquid Balance and Working Capital Requirement, which have been shown to be better predictors of financial performance.  Alongside, minimize their Cash Conversion Cycle, manage their net liquid balance and align their Working Capital Requirement with their operational needs. Since maintaining an appropriate balance between liquidity and profitability is crucial, firms should strive to optimize their cash and liquid assets to meet operational needs while ensuring that excess liquidity is invested wisely to generate returns.