Effect of cash management on profitability of Nigerian manufacturing firms

Abstract

The success of any business venture is predicated on how the management has planned and controlled its cash flows. Cash shortage will disrupts the firm's smooth operation and can even lead to insolvency. Excessive cash will tie down unnecessarily long-term capital with a result that the return on capital employed will be low. Thus, cash management assumes more significance than other current assets because cash is the most important asset that a firm holds. However, literature revealed that only limited studies have investigated the relationship between cash management and profitability in Nigeria. Therefore, this study examined the relationship between cash management and profitability in the Nigerian manufacturing firms. Correlation and regression analysis were carried out. The results reveal a positive and significant relationship between CCC and ROE on one hand and a non significant negative relationship between CCC and ROA. From the results of the study, it is recommended that future researchers should expand the scope of their studies to include multiple sectors of the economy.

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