Working Capital Management Policy and Financial Performance in the Nigerian Foods and Beverages Industry: A Study of Nestle Nigeria Plc (2008-2012)

Ogbuji, Isaac, Ogunyomi Oluwatosin Olatunji


This study empirically evaluated the relationship of working capital management policy and financial performance of Nigerian foods and beverages industry, using Nestle Nigeria Plc as case study within the period of 2008-2012. However, the need for this study arises as a result of persistent wind-up of most Nigerian manufacturing firms, of which a greater proportion of the firm’s capital is made up of fixed assets rather than working capital which theoretically have direct effects on profitability and liquidity of business enterprises irrespective of their sizes.  The study employed the use of descriptive analysis, accounting ratios and simple correlation analysis to test the formulated hypotheses respectively. The findings revealed that working capital management policy have relationship with the firm’s financial performance. Specifically, a negative significant relationship existed between WCM and profitability performance while a negative insignificant relationship do exist between WCM and liquidity performance of Nestle Nigeria Plc within the period covered by the study. Based on this result, it is recommended that the company should adopt aggressive investment working capital policy as well as aggressive financing working capital policy as against the conservative working capital policy used in Nestle Nigeria Plc within the period of the study which hampered their financial performance.

Keywords: Working Capital Management Policy, Financial Performance, Profitability, Liquidity and Accounting ratios

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