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Liquidity and The Profitability of Manufacturing Firms in Nigeria

Applied Finance and Accounting

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Title Liquidity and The Profitability of Manufacturing Firms in Nigeria
 
Creator AKINLEYE, Gideon Tayo
OGUNLEYE, Joseph Segun
 
Description This study examined the relationship between liquidity and profitability of manufacturing firms in Nigeria. The study specifically analyzed the effect of cash ratio, current ratio and quick ratio on profit after tax of the manufacturing firms in Nigeria. Secondary data were collected from annual reports of sampled firms over a period of ten years (2007-2016) and were analyzed using panel data estimators such as pooled OLS estimator, fixed effect estimator, random effect estimator, Hausman test, panel co-integration and pooled granger causality tests. The findings revealed that financial liquidity proxy in terms of quick ratio (QR) had a negative and insignificant impact on profit after tax with coefficient estimate of -0.094121 (p=0.2247 > 0.05). Financial liquidity measured in terms of Cash ratio (CR) exert positive and significant impact on profit after tax with coefficient estimate of 0.379774 (p=0.0121< 0.05). Result also showed that financial liquidity measured in terms of Current ratio (CNR) exert insignificant negative impact on profit after tax with coefficient estimate of -0.024989 (p=0.1163 > 0.05). Meanwhile the study revealed that quick ratio (QR), cash ratio (CR) and current ratio (CNR) has 0.581533 (58.1%) variation in profit after tax (PAT). Result further revealed that that there is no long-run relationship between liquidity and profitability of manufacturing firms in Nigeria. The study concluded that financial liquidity has helped to improve financial performance selected manufacturing firms in Nigeria. Also, that cash ratio has positive and significant effect on the profitability of manufacturing Firms in Nigeria. Thus, firms in the manufacturing industry should objectively try to reduce their bill receivable, so as to guide against waiting longer to collect from customers, for the purpose of increasing their profitability.
 
Publisher Redfame publishing
 
Contributor —
 
Date 2019-08-26
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://redfame.com/journal/index.php/afa/article/view/4477
10.11114/afa.v5i2.4477
 
Source Applied Finance and Accounting; Vol 5, No 2 (2019); 68-73
2374-2429
2374-2410
 
Language eng
 
Relation http://redfame.com/journal/index.php/afa/article/view/4477/4665
 
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