EFFECT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED PHARMACEUTICAL COMPANIES IN NIGERIA
Abstract
ABSTRACT
This study investigates the effect of working capital management on the financial performance of listed pharmaceutical companies in Nigeria. The research focuses on how key components of working capital, namely Customer Collection Period (CCP), Supplier Payment Period (SPP), and Cash Conversion Cycle (CCC), influence profitability indicators, specifically Return on Assets (ROA), Earnings per Share (EPS), and Return on Equity (ROE). The study adopted an ex-post facto research design and relied on secondary data obtained from the financial statements of four pharmaceutical companies listed on the Nigerian Exchange Group between 2015 and 2024. Pearson correlation and multiple regression analysis were employed to analyse the data.
The findings reveal that the Cash Conversion Cycle has a significant negative effect on both ROA and EPS, indicating that longer working capital cycles reduce asset efficiency and earnings performance. However, the effect on ROE was not statistically significant, suggesting that shareholder returns may be influenced by other structural or financial factors beyond working capital practices. Additionally, the Supplier Payment Period showed no significant relationship with any of the financial performance metrics. These results highlight the importance of efficient liquidity and operational management, especially in capital-intensive sectors such as pharmaceuticals.
The study concludes that reducing the cash conversion cycle can significantly enhance financial outcomes and recommends that firms adopt aggressive receivables management and streamlined inventory practices. By doing so, companies can strengthen profitability and maintain competitiveness in the industry.
Keywords: Working Capital Management, Financial Performance, Return on Assets, Earnings per Share, Return on Equity, Cash Conversion Cycle, Nigerian Pharmaceutical Sector, Liquidity Management, Corporate Finance.
Word Count: 233
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