Working Capital Case Study

This study empirically investigated impact of working capital management on profitability of Nigeria Breweries Plc. This research expands the horizon of knowledge in this area by shedding more light on working capital management as measured by the components of working capital, and how the individual components influence the profitability of Nigeria Breweries Plc. Using the ex-post factor research design, secondary data were extracted from the company’s annual report and accounts for the relevant period. The Ordinary Least Square (OLS) analytical technique was adopted for data analysis. The findings from this study indicate that current ratio positively correlate with profitability of Nigeria Breweries Plc which is proxied by return on capital

Profitability is measured by the rate of operating return on total assets; that is, EBIT/total assets. The risk that the firm will encounter financial difficulties is related to the firm's net working capital position. There are three alternative working capitals policies which constitutes the basis for decisions. These are conservative approach, aggressive approach, and moderate approach. In conservative approach, the firm holds a relatively large proportion of its total assets in the form of current assets. Because the rate of return on current assets normally is assumed to be less than the rate of return on fixed assets, this policy results in a lower expected profitability as measured by the rate of return on the firm's total assets. Assuming that current liabilities remain constant, this type of policy also increases the company's net working capital position, resulting in a lower risk that the firm will encounter financial

Based on this, the null hypothesis is accepted and the alternative rejected. Indeed, the study postulates that there is no positive relationship between quick ratio and profitability of Nigeria Breweries Plc.
HO3: There is no significance relationship between trade receivables collection period and profitability of Nigeria Breweries Plc
HA3: There is a significance relationship between trade receivables collection period and profitability of Nigeria Breweries Plc For hypothesis three, with reference to table 4.5 and using the t-statistic to test for the significance of the estimated coefficient, the calculated t-statistic is 2.826770 and the table value is 1.895 at 95 percent confidence interval. Given that the calculated t-statistic is greater than the table value, that is 2.826770 >1.895 with degree of freedom n-2 (i.e. 9-2) = 7 at one tail 5 percent level of significance, the null hypothesis of no significance is rejected, and the alternative