Working Capital Management Practices and Profitability in Nigeria

The paper investigates the effect of working capital management practices on profitability of twenty-five Nigerian listed non-financial firms between financial years, 2010 and 2016. Pooled ordinary least squares (POLS) and Random effects generalised least squares (REGLS) were employed as data analytical tools. Result indicates that three of the components of working capital management practices (average collection period, inventory turnover period and cash conversion cycle) have significant influence on profitability of Nigerian firms. It therefore suggests that proper management of components of working capital is a means by which profitability and shareholders’ value can be increased. The outcome provides empirical evidence that Nigerian firms used aggressive policy as a working capital management practice in achieving organisational success during the period of study.