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IMPACT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF MANUFACTURING COMPANIES
Abstract
The main objective of this study is to empirically test the impact of working capital management on the profitability of manufacturing companies. The methodology employed for data collection is both primary and secondary sources. The primary data were collected through the administration of well structured questionnaire to sixty five (65) senior staff of Starline Nigeria Limited, Aba and J. Udeagbala Holdings, Aba. The data as well as the hypotheses were analyzed and tested using Correlation Test which was run using Statistical Package for Social Sciences (SPSS) version 16.0. For decision making, Spearman’s rho Correlation Co-efficient was used and the results indicated **(double star) at the 0.01 level (2-tailed) in the Spearman’s rho correlation coefficient table, this implies that correlation is significant and positive and that the independent variables are contributory factors to the dependent variable. Hence, all the null hypotheses were rejected and the alternative hypotheses accepted which implies that proper inventory management has significant positive correlation with profitability of manufacturing companies, proper receivables management has significant positive correlation with profitability of manufacturing companies, proper cash management has significant positive correlation with profitability of manufacturing companies and proper payables management has significant positive correlation with profitability of manufacturing companies. The paper concluded that working capital management has significant impact on the profitability of manufacturing companies and recommended among other things that inventory levels should be closely monitored to avoid over or under stocking which affects the liquidity and profitability level of companies, company’s credit policy should be revised from time to time to be in line with the current trend of things and qualified / experienced financial managers should be engaged to manage the company’s working capital adequately, in order to enhance the company’s profitability.
Keywords: Working Capital Management, Profitability, Manufacturing Companies.