Liquidity management and financial performance of consumer goods firms in Nigeria

Abstract

This research aims to study how managing liquidity affects the financial position of consumer goods companies in Nigeria. Using an ex-post-facto design, the study gathered data from secondary sources to examine the correlation between various factors. The population of the study consists of twenty-one consumer goods firms listed on the Nigerian Exchange Group (NGX) from which thirteen of them were selected as samples. Data covering eight years (2015-2022) from the annual financial statements were analyzed through multiple regression analysis. The outcomes indicated that while the current ratio didn't significantly influence the financial performance of these firms (p<0.720), the cash conversion cycle showed a positive but insignificant effect (p<0.705). Conversely, the quick/acid test ratio demonstrated a significant effect on the financial performance of the listed firms (p>0.002). The study therefore recommends that managers and owners of consumer goods companies in Nigeria should consider the risk-return trade-off between liquidity, represented by current assets, and profitability, as depicted by returns on equity, when making decisions.