– The Effects of Working Capital Management on the Profitability of Manufacturing Company –
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ABSTRACT
The study investigated the Effects of Working Capital Management on the profitability of manufacturing Company, Cadbury Nigeria Plc. was selected as a Case study.
The specific objectives of the study are to identify the various components of working capital in Cadbury Nigeria PLC; evaluate the impact of working capital management on the profitability of Cadbury Nigeria PLC. The study adopted the ex-post factor research design.
Three hypotheses were formulated and tested; the reason for using this method is to enable the researcher compare and group information and data accordingly. The computation of ratios was limited to those that have to do with working capital of the company.
At the end of the study, the researcher found out that STO, AP and LQ had significant negative relationships with the industries’ profitability ratio at 1% level of significance.
On the other hand, the company’s AR had significant and positive relationships with the profitability ratio at 1% levels of significance. CCC had negative but non-significant relationship with the company’s profitability ratio.
Based on the findings the following recommendations were made that the company should reduce the period between the time cash is paid out for raw material and the time cash is recorded from sales of the company’s product.
This will provide funds for regeneration and increasing working capital of the firm there after, the company should pay more attention to its liquidity position and improve on it.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Problem statement
1.3 Purpose of the study
1.4 Significance of the study
1.5 Study hypotheses
1.6 Scope and Limitations of the Study
1.7 Definition of Basic terminologies
1.8 Organization of Study
CHAPTER TWO: REVIEW OF RELATED AND RELEVANT LITERATURE
2.1 Introduction
2.2 Conceptual Review
2.3 Theoretical Framework
2.4 Empirical Studies
CHAPTER THREE RESEARCH METHODOLOGY
3.1 Research Design
3.2 Nature and Sources of Data
3.3 Description of Research Variables
3.4 Technique for Analysis
3.6 Model Specification
3.7 Computing the Multiple Regression Analyses
CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction
4.2 Data Presentation
4.3 Data analysis
4.4 Data Interpretation
CHAPTER FIVE CONCLUSION, SUMMARY, RECOMMENDATION
5.1 Introduction
5.2 Conclusion and Findings
5.3 Summary of the Study
5.4 Recommendation
Bibliography
INTRODUCTION
1.1 Background to the Study
The working capital of a company has a major role in making it profitable or non-profitable. Most of the potential investors and others analyze position statement to evaluate the management of working capital. Net Working capital consists of current assets less Short-term obligations.
Positive working capital explain that the corporation is in a fine condition to reimburse it’s short-term debt whereas negative working capital explain that the most liquid assets of the corporation are not sufficient to fulfill its current monetary commitments.
Any finance manager must sustain a most favorable point of investment in the most liquid assets of the company. Working capital for any business is the amount of capital to carry out its daily basis operations.
In manufacturing concerns, it is the investment required for the conversion of raw material into ready to sell products for the company. The most important items inside determination of working capital are inventories of the corporation, its accounts receivables and payables.
The management of working capital frequently considered a tool to maintaining competence of the business inside their operations. Working capital is often assessed by lenders to judge the financial short term paying back ability in difficult financial periods.
One of the key determinants of survival and sustainable business growth of modern organizations is the effectiveness of accounting and finance department or function (Eljielly, 2004).
One area of accounting and finance that affects the efficient operations of business organisations in general is working capital management (WCM), among other things (Eljielly, 2004; Shin &Soenen, 1998; Tauringana&Afrifa, 2013).
BIBLIOGRAPHY
Abdul and Nasr (2007).Working Capital and Profitability-a Case Study of Pakistani Firms, International review of business research papers vol.3, no 1 march.
Abdul, R. and Mohamed, N. (2007).Working capital management profitability.Case of Pakistani firms.International Review of Business Research paper, 3, (1), 279 -300.
Aborede, R., (2006). Strategic Financial Management.Shomolu, Lagos master stroke Consulting Ltd.
Adina, E.D. (2010). Working capital management and profitability: A case of Alba county companies (12), 1-36.
Afza, T. and Nazir, M.S. (2007). Working capital management practices of capital management practices of firms. Empirical evidence from Pakistan in the proceeding of 9th South East Asianmanagement forum (SAMF) held on February 24-25, 334 – 343, North South university Dhaka, Bangladesh.
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