Articlebronze2013

Liquidity Management and Profitability of Manufacturing Companies in Nigeria

64 citations0/0 files storedIOSR Journal of Business and Management

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Working Capital and Financial Performance Financial Analysis and Corporate Governance Supply Chain and Inventory Management

Abstract

Liquidity and its management determines to a great extent the growth and profitability of a firm.This is because either inadequate liquidity or excess liquidity may be injurious to the smooth operations of the organization.This seeming controversy has attracted a lot of interest in the subject of liquidity management.The primary aim of this paper is to investigate the relationship between liquidity and profitability.The analysis is based on a sample of 30 manufacturing companies listed on the Nigeria Stock Exchange for the period 2006-2010.The result suggests that current ratio and liquid ratio are positively associated with profitability while cash conversion period is negatively related with profitability of manufacturing companies in Nigeria.The association in all the cases was however, statistically insignificant, indicating low degree of influence of liquidity on the profitability of manufacturing companies.Hence, the overall state of liquidity should be improved by establishing more realistic credit policy which would engender shorter cash conversion period (CCP), hence have a favourable impact on the profitability of the company.

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References

2003Does Working Capital Management Affect Profitability of Belgian Firms?2007Effects of working capital management on SME profitability 2004Liquidity - profitability tradeoff: An empirical investigation in an emerging market 2006TRENDS IN WORKING CAPITAL MANAGEMENT AND ITS IMPACT ON FIRMS, PERFORMANCE: AN ANALYSIS OF MAURITIAN SMALL MANUFACTURING FIRMS 2010The Relationship Between Working Capital Management And Profitability: Evidence From The United States 2009The Influence of Working Capital Management Components on Corporate Profitability: A Survey on Kenyan Listed Firms 1997Evolution and Revolution as Organizations Grow 2006Effects of Working Capital Management on SME Profitability

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