IMPACT OF WORKING CAPITAL MANAGEMENT ON FIRMS EFFICIENCY AND PROFITABILITY (A STUDY OF SELECTED COMPANIES IN PORT HARCOURT)

ABSTRACT

Working capital has been found to be an essential ingredient for the survival of a typical business organization.  The way this is carried out could affect the profitability or effectiveness of the firm.  This study was undertaken to investigate the ways company adopt to manage their working capital and the possible effect on the firm’s efficiency and profitability.  Three (3) companies based in Port Harcourt were used as a study.  Questionnaire copies were issued to management staff of these companies.  Responses from these questionnaire provided the data for our analysis; Annual reports of these firms also provided the secondary data. To give the study a scientific focus, four (4) hypotheses were formulated and tested in the core areas of investigation.  It was discovered in the study that most firms depend on the use of cash budget to determine the optimal cash to hold.  Inability to use the cash models to determine the level of cash to shift to marketable securities and the possible balance to maintain at any particular period had rendered the working capital management ineffective in these firms.  Based on the findings of this study, we recommended among others, that, firms in Nigeria should employ managers who are skilled on the use of financial models so as to be able to apply the necessary tools in the management of their working capital for effective result.