Short-Term Asset-Mix Accounting (STAMA) and Profitability of Manufacturing Conglomerates in Nigeria

Samuel Eniola Agbi, Ismaila Yusuf

Abstract


Abstract
Short-Term Assets (STA) are the essence of a business; their prudent management can uplift and sustain the continuous flourishing of a company and can consequently determine its success. The efficient management of these various components creates a problem of how to achieve a balance or trade-off between liquidity and profitability. The study will examine the relationship between different components of STA and the impact that effective STAM has on the profitability of manufacturing companies in Nigeria. The study adopts the explanatory research methods examining STAM and profitability in a causal relationship. Data were gleaned from the annual reports of five sampled Manufacturing Companies (MC) covering the period of 2010-2014. Using regression analysis, the study tests the influence of debtors’ collection period,
creditors’ payment period and inventory on profitability of a sample of 17 Consumer Goods manufacturing companies listed on the Nigerian Stock Exchange. The study found that debtors’ collection period and creditors’ payment period have negative  significant impact on the profitability of consumer goods manufacturing companies in Nigeria while Inventory turnover have a negative but insignificant influence. The study recommends, among other things, that manufacturing firms should ensure that sound credit collection policies (CCP) are instituted within the organization; that efforts should be made to ensure that payments to creditors are not stretched beyond the credit period.


Keywords  
Creditors’ payment period, inventory turnover, profitability, short-term assets, working
capital

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