Effect of Working Capital Components on Profitability in Selected Food and Beverage Companies in Nigeria

Abstract

Firms’ ability to carry out their stakeholders’ requirements is closely related to working capital. The vital issue confronting managers today is the extent to which effect of working capital components influence profitability in selected food and beverage firms in Nigeria has remained a subject of concern among participant in the Nigerian food and beverage firms. Therefore, this study is an attempt to examine the effect of working capital components on profitability in selected food and beverage firms in Nigeria. The study adopts ex-post facto research design whereby data was sourced mainly from the audited annual financial reports of selected food and beverage firms in Nigeria on the Nigerian Exchange Group for the period 2007-2022. The population of the study consists of ninety-eight (98) non-financial institutions in Nigeria as at 2022. The sample size of ten (10) food and beverage firms in Nigeria was arrived at using purposive sampling technique whereby non-financial firm which have their annual report and accounts readily accessible for the study period were selected. Analytical techniques used in the study consist of inferential statistics. Panel regression analysis was used to analyse the extent to which working capital components affect profitability in selected food and beverage companies in Nigeria Findings from the result of panel regression analysis on the extent to which working capital components affect profitability in selected food and beverage companies in Nigeria showed that two out of the four explanatory variables were significant in explaining variation in profitability. These cash (p=0.0000) and account payable (p=0.0000). Based on the findings, the study therefore revealed that there is relationship between working capital components and profitability in selected food and beverage firms in Nigeria. The study recommend that Food and beverage companies should improve receivables management through timely collections, credit policy optimization, and reducing overdue debts can enhance cash flow and profitability.