AN EXAMINATION OF THE MANAGEMENT OF WORKING CAPITAL (A CASE STUDY OF NIGERIA BAG MANUFACTURING COMPANY)
Abstract
This research looked at the relationship between working capital management and profitability, using Dangote Sugar Refining Company as a case study. The study made use of the internet.
The independent variables are net working capital (NWC) and inflation (INF), while profit after tax (PBT) is the dependent variable (PAT)
The dependent variable was chosen to represent profitability. Secondary information for the
The study variables were obtained by conducting a content analysis of the DSR annual reports.
for the years 2009 to 2018 Descriptive statistics and multiple regression were used in the study.
techniques for data analysis based on the E-view 10 software The outcomes revealed
that while all of the independent variables had a positive relationship with profit after tax, only net profit did
Working capital was substantial at the 5% level.
The regression results also revealed that
A coefficient of determination (R-squared) value of around 0.93 indicates that approximately 93 percent of
The combined effect of changes in the dependent variable accounted for changes in the dependent variable.
variables that are unrelated The combined effect of explanatory variable variations
Changes in the dependent variable were significantly explained with a probability of F-statistic value of
0.00889 (at 5 percent level of significance).
In addition, the adjusted R-squared value of 0.91
This means that the model used for the analysis is a good fit. According to the study’s findings,
Working capital management has a strong positive correlation with profitability. Based on the study’s findings, it was recommended that DSR management maintain the
current working capital management policies, but they must keep a close eye on their liquidity position at all times
times.
Keywords: Management, Inflation, Net Working Capital, Profit, Profitability
INTRODUCTION
A company’s working capital management is concerned with the control and management of its current assets.
and current liabilities in order to strike a balance between liquidity and profitability. This is a critical area.
In financial management, the investment in short-term assets of a company. Pandey’s (2005)
Working capital was divided into gross working capital and net working capital. He explained gross.
Working capital is defined as a company’s investment in current assets that can be converted into cash within a short period of time.
a brief period of time Cash, short-term securities, receivables, and inventories are examples of these.
Net working capital, on the other hand, is the difference between current assets and current liabilities.
liabilities. Current liabilities are obligations owed to third parties that are expected to be paid in the near future.
Payment is due in less than a year.
It is critical that a company always keep enough on hand.
working capital position to enable the organization to carry out its daily business operations
while maintaining a healthy balance of profitability and liquidity A situation in which a company
It is risky to have excess working capital or insufficient working capital. Working too much
Holding idle funds that will generate no income for the business is referred to as capital position.
The cost of which will reduce earnings, while an insufficient working capital position will render the firm insolvent.
unable to meet maturing obligations and unable to capitalize on new short-term business opportunities
opportunities with promising future prospects
The goal of strategic financial management’s working capital management is to
maintain efficient levels of current assets and current liabilities to ensure a firm’s viability
sufficient cash flow to meet its short-term maturing obligations
2013). This means that maintaining working capital is the most important issue in working capital management.
liquidity in the company’s day-to-day operations This is required to avoid trade creditors and
suppliers whose claims fall due to undue pressure on the firm and thus ensure
the smooth operation of the business as a going concern A productive working capital
Management can add value to stakeholders; otherwise, the business will suffer.
This can lead to financial difficulties. Working capital management entails both planning and execution.
controlling current assets and current liabilities in such a way that the risk of inability is eliminated
to meet short-term obligations while avoiding overinvestment in these assets (Eljelly)
2004).
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AN EXAMINATION OF THE MANAGEMENT OF WORKING CAPITAL (A CASE STUDY OF NIGERIA BAG MANUFACTURING COMPANY)
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