Inventory Management and Financial Performance of Listed Manufacturing Companies in Nigeria

Abstract

Inadequate inventory management has caused majority of Nigerian manufacturing companies to go out of business. When the right kind of inventory is employed during production, waste may be decreased while there can be increase in efficiency, thereby improving the company’s performance. The study examined inventory management and financial performance of listed manufacturing companies. Ex-post facto research was utilised by the study. Secondary data was derived from the financial statements of 10 selected listed manufacturing companies from 2014-2023. Descriptive statistics, correlation and regression analysis were used at 0.05 significant level. It was found that inventory collection period has no effect on return on asset, inventory turnover significantly affects return on asset, and inventory to asset ratio has significant effect on return on asset. It was concluded that inventory turnover and inventory asset ratio as measurements of inventory management are good predictors of return on asset of listed manufacturing companies in Nigeria, while stakeholders cannot rely on inventory conversion period in forecasting return on asset. As a result of the findings, it was suggested that officers in charge of inventories should focus more on methods for cutting down inventory days and quickly collecting accounts receivable, so as to improve their inventory conversion period.