Title:
EFFECT OF ASSET TURNOVER ON OPERATING PROFITABILITY OF CONSUMER GOODS COMPANIES IN NIGERIA

Authors:
Ewogu Boniface Onah and Prof. I. M. Okwo

Abstract:
The study examined the effect of asset turnover on operating profitability of consumer goods companies in Nigeria. The specific objectives are: Firstly, to determine the effect of inventory turnover ratio on net profit margin ratio of consumer goods companies in Nigeria. Secondly to ascertain the effect of accounts receivable turnover ratio on net profit margin ratio of consumer goods companies in Nigeria. Thirdly to explore the effect of net asset turnover ratio on net profit margin ratio of consumer goods companies in Nigeria. Three of such companies quoted in Nigeria Exchange Group were randomly selected due to availability, accessibility and comprehensiveness of data. The design considered appropriate is ex – post facto since the data were secondary drawn from annual reports and financial statements of the selected companies. The tool of analysis was multiple regression. The result showed that inventory turnover ratio and accounts receivable turnover ratio have statistically negative and non - significant effect on net profit margin ratio of consumer goods companies in Nigeria with p – values of 0.3227 and 0.3139 respectively. On the other hand, net asset turnover ratio has a negative and significant effect on net profit margin ratio of consumer goods companies in Nigeria with p – value of 0.0000. This implied that these companies may have initially reduced initial prices of their products to meet up with the competitive nature of the market. The companies might have observed efficient supply chain management that gave rise to steady stock supply without overstocking in the market. Also, the market demand may be relatively stable and less affected by drastic changes. The researcher therefore recommended that there should be strategic inventory management among the firms to overcome competition in the market. The credit policies by the firm and the government should be such that will be in line with peculiar market characteristics. Besides, the management should focus on strategic asset investment that will trigger efficiency in operation and profits towards sustainable growth.

Keywords:
Asset turnover, Operating profitability, Consumer goods company

DOI:
https://doi.org/10.37500/IJESSR.2024.7110

Date of Publication: