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Arabian Journal of Business and Management Review

ISSN: 2223-5833

Open Access

Effect of Working Capital Management on the Performance of Food and Beverage Industries in Nigeria

Abstract

Criscent Ike Eya

This study examined the impact of working capital management on firm performance using Nestle Food Nigeria plc as a case study. The study was anchored on Behavioural Finance Theory, Economic Order Quantity (EOQ) Model and Theory of Capital Movement. Secondary data was used for the study and it was obtained from the financial statement of Nestle Nigeria Plc for the period of 2004-2013. The study made use of Ordinary Least Squares (OLS) regression after the data was subjected to unit root test and found to be stationary at levels and are integrated of order zero [I(0)]. The findings revealed that a positive relationship exist between Current Ratio (CUR), Quick Ratio (QUR) and Return on Asset (ROA) and the relationship is statistically significant (p<0.05) and in line with a priori expectation. The coefficient of determination (R2) for the study is 85.23%. This indicates that 85.23% of the variations in the model can be explained by the explanatory variables of the model. The result shows that the management of working capital is important to business organization performance. It was recommended among others that the management of the Nestle Food Nig Plc should pay more attention on the management of quick ratio as its management indicates the best way of measuring the amount of the most liquid current assets there are to cover current liabilities. Management should therefore aim at higher values of quick ratio as a higher ratio means a more liquid current position of the company which is a good indicator of firm performance.

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