Effect of Inventory Management and Financial Performance of Manufacturing Firms in Nigeria

Abstract

The study examines the effect of inventory management on the financial performance of selected manufacturing firms in Nigeria. The ex-post facto design was adopted in this study. 56 listed manufacturing firms in the Nigerian Stock Market were selected as the population of the study. Eleven (11) companies were selected using a purposive sampling method. Multiple Ordinary Least Square regression technique, specifically the panel regression model was applied in testing the hypotheses of the study. Firstly, the study revealed that cash conversion cycle has a negative significant effect on return on assets of listed manufacturing firms in Nigeria. The second hypothesis tested showed that account receivable turnover has a positive significant impact on return on assets of listed manufacturing firms in Nigeria. The third hypothesis tested that indicated that account payable turnover has a positive significant effect on return on assets of listed manufacturing firms in Nigeria. Consequently, the recommendations of the study that manufacturing firms in Nigeria should speed up the conversion of finished into sales. Through putting in place appropriate marketing strategies that ensure quick sales of product to attract more revenues and profit, this can be achieved. Again, manufacturing firms should strive to retain only credit worthy customers who would ensure prompt payment of account receivables. By so doing, quick returns would be enhanced and profitability of manufacturing firms boosted. In conclusion, the manufacturing firms should strive to achieve timely payment of credit purchases as this would aid the suppliers have greater confidence in entrusting more raw materials to the firms on credit basis with the positive effect of boosting their inventories, increased sales and profit.