EFFECT OF LIQUIDITY MANAGEMENT ON THE FINANCIAL PERFORMANCE OF CONSUMER GOODS FIRMS IN NIGERIA
Abstract
This study explores the effect of liquidity management on the financial performance of consumer goods firms in Nigeria from 2014 to 2023. The study was anchored in Agency Theory. An ex-post facto research design was employed, utilizing secondary data from annual reports of 21 listed consumer goods firms. The analysis focused on a sample of six firms: Guinness, Cadbury, Honeywell, Flourmills, Nestle, and Dangote Sugar Nigeria Plc. Employing a multiple regression panel model, the study assessed the relationship between liquidity ratios and financial performance. Findings reveal that the cash ratio does not significantly impact the financial performance of these firms. In contrast, the current ratio and quick ratio exhibit significant effects. Based on these results, the study recommends that firms should enhance their liquidity management strategies by optimizing their quick ratio, avoid excessive investment in current assets to prevent negative impacts on profitability, and reevaluate cash holding policies to ensure cash is effectively utilized. These measures aim to improve overall financial performance by addressing the critical elements of liquidity management.
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