EFFECT OF ASSETS AND LIABILITIES ON OPERATING PERFORMANCES OF LISTED BREWERIES COMPANIES IN NIGERIA
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EFFECT OF ASSETS AND LIABILITIES ON OPERATING PERFORMANCES OF LISTED BREWERIES COMPANIES IN NIGERIA
ABSTRACT
This study looks at how assets and liabilities affect the operating performance of Nigerian listed brewers. A proper research was carried out to ascertain the impact of assets or liabilities on the financial performance of listed brewery companies in Nigeria
to evaluate the effect of credit turnover ratio (CTR) on operating performances of listed breweries companies in Nigeria, to assess the influence of inventory turnover ratio (ITR) on operating performances of listed breweries companies in Nigeria, and to examine the impact of cash ration (CR) on operating performances of listed
This study’s data came from secondary sources. The preliminary step of this study was primarily the collection of data from relevant literature, which included journals, publications, libraries, the internet, and annual reports from Nigerian and Guinness Breweries Companies.
In addition, the ten-year financial report account would be heavily employed. One of the results drawn from earlier research is that assets and liabilities influence the success of Nigerian breweries and the Guinness Breweries Company.
INTRODUCTION
Apart from the telecommunications and oil and gas sectors, the brewing industry has received the most Foreign Direct Investment (FDI) in the country. Such investments include Heineken’s largest stake outside of Europe, Nigeria Breweries Plc.
It also acquired a 50.2% share in Consolidated Breweries Plc. (Omolara, 2006). The Nigerian brewery business is currently worth $15 million and is a classic example of a duopoly (Ahmed, 2010).
Despite a few minor businesses, Nigerian Breweries Plc. and Guinness Nigeria Plc. dominate the industry, accounting for 80% of the total. When we evaluate the underlying ownership of the two brewers
the concentration level becomes considerably more evident. NB Plc. is majority-owned by Heineken, while Guinness Nigeria Plc. is majority-owned by the Diageo Group.
The global beer market has become increasingly concentrated over the previous 5-10 years, with a wave of corporate combinations among brewery titans and diversification of investments beyond their geographical location.
All of this is aimed at dominating the market and increasing shareholder wealth. Increasing market dominance, which maximises shareholder wealth, is heavily reliant on firm-specific variables such as consistent profitability.
Profit maximisation for any firm is dependent on efficient cost and production process management, as well as increased sales due to the firm’s market dominance. Working capital is thought to have a significant impact on corporate profitability.
Current assets make up more than half of a manufacturing firm’s total assets. Excessive amounts of current assets can easily result in a firm realising a mediocre return on investment; nevertheless, when the level of current assets is low, the firm may experience shortages and its operations will be hampered. Horne, Wachowiz (2005).
The firm is responsible for paying off its present liabilities when they become due. Efficient working capital management manages current assets and liabilities in a way that removes the risk of failing to satisfy short-term obligations and avoids overinvestment in current assets.
This management of short-term assets is just as important as managing long-term financial assets because it directly contributes to maximising a company’s profitability, liquidity, and overall success. As a result, knowing the function and drivers of working capital allows firms to reduce risk while improving overall performance (Lamberson, 2006).
It is critical that a company maintains liquidity so that it can satisfy its short-term obligations as they become due. Increasing earnings at the expense of liquidity exposes a company to major issues such as insolvency and bankruptcy.
On the other side, having too much working capital wastes cash and, as a result, reduces profitability (Chakraborty, 2008). Liquidity is thus critical for a corporation.
A tradeoff between the firms’ two objectives should be reached to ensure that one is not achieved at the expense of the other, despite the fact that both are equally vital. A company that does not care about profits will not be able to survive for long.
On the other hand, if it does not prioritise cash, it risks insolvency or bankruptcy. For these reasons, working capital management should be carefully considered, as it will eventually effect the firm’s profitability.
Short-term asset management is as important as managing long-term financial assets since it directly contributes to the maximisation of a business’s profitability, liquidity, and
Business organisations are seen as critical components of a healthy and thriving economy. They make a substantial contribution to global economic growth and development by creating jobs and reducing poverty.
Manufacturing enterprises in Nigeria have experienced the troubled syndrome as a result of poor working capital management. According to this viewpoint, studies show that many business organisations have become moribund
with some leaving the country to seek survival in other African countries, while those that remain are considering mergers and acquisitions due to the liquidity problem syndrome.
Scholars, researchers, and accountants have recognised working capital management as a cure for organisational survival in today’s global competitive landscape. According to Eya (2016), working capital management is an important aspect of corporate investment that is required for ongoing operations.
According to Angahar and Alematu (2014), effective working capital management is critical to the financial performance of businesses of all sizes and acts as a key indicator of a company’s financial health. In a similar spirit, Padachi (2006) believes that working capital management is critical to the financial health of businesses of all sizes.
Sanusi (2006) agrees with prior research that working capital is the lifeblood of business organisations because it serves as a pool of liquid assets that provide a safety net to creditors.
It provides a liquid reserve to cover contingencies and the ever-present uncertainty about a company’s capacity to balance cash outlays with enough inflows of capital. According to Akinlo (2011), inadequate or inefficient working capital management causes funds to be tied up in idle assets, lowering a company’s liquidity and profitability.
According to Eya (2016), working capital refers to monies that are locked up in materials, work in progress, finished goods, receivables, and cash and financial equivalents. Falope and Ajilore (2009) define working capital as the surplus of current assets supplied by long-term creditors.
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