ABSTRACT
The study empirically assessed the effect of working capital on the profitability of
an organization using selected quoted manufacturing companies across different
industries in Nigeria. The inability
of many organizations to effectively manage their working capital in such a way that it will lead to a sustainable performance has been
identified as the bane of organizational growth in Nigeria. The study applied
ordinary least square i.e multiple regression analysis as its estimating technique. A model that expressed return on capital employed which is a
proxy for organization performance as function of working capital,turn over and equity was formulated. After the model estimation it was discovered that some of the companies used showed a negative relationship
between working capital and organization profitability, others showed a
positive relationship. It wasalso
discovered that working capital of all the firms do not have significant impact
on their performances during the
period under review. Consequently, it is recommended that firms should
reappraise the trends of their
workingcapitalvisavistheirperformanceswithaviewtochoosingappropriatelevelofcashconversionflow that will not hamper
their profitability. Again, government should provide enabling environment
forbusiness organizations to thrive since literature have shown that business environment tend to
have more impacton organization’s performance and profitability than working capital especially in a
developing country likeNigeria.
