EFFECTS OF WORKING CAPITAL MANAGEMENT ON PROFITABILITY OF MANUFACTURING FIRMS IN NIGERIA

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CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

The working capital of a company has a major role in making it profitable or non-profitable. Most of the potential investors and other analyze position statement to evaluate the management of working capital. Net Working capital consists of current assets less short-term obligations. Positive working capital explain that the corporation is in a fine condition to reimburse its short-term debt whereas negative working capital explain that the most liquid assets of the corporation are not sufficient to fulfill its current monetary commitments. Any finance manager must sustain a most favorable point of investment in the most liquid assets of the company. Working capital for any business is the amount of capital to carry out its daily basis operations. In manufacturing concerns, it is the investment required for the conversion of raw material into ready to sell products for the company. The most important items inside determination of working capital are inventories of the corporation, its accounts receivables and payables. The management of working capital frequently considered a tool to maintaining competence of the business inside their operations. Working capital is often assessed by lenders to judge the financial short term paying back ability in difficult financial periods.