The Impact of Working Capital Management on the Financial Performance of Nasarawa Transport Company
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Background of the Study
Effective working capital management (WCM) is critical for the financial success and sustainability of businesses, especially for companies involved in transportation services like Nasarawa Transport Company. WCM refers to the management of short-term assets and liabilities to ensure that a company has sufficient liquidity to meet its operational needs (Miller & Adams, 2024). For transport companies, efficient WCM is essential for maintaining operational fluidity and ensuring timely service delivery, which in turn affects customer satisfaction and financial performance.
Nasarawa Transport Company, a major transportation service provider in Nigeria, faces challenges in managing its working capital effectively due to the fluctuating nature of the transport industry. The company's financial performance is significantly influenced by the efficiency with which it manages its cash, receivables, payables, and inventory (Khan & Umar, 2023). Poor working capital management can lead to liquidity problems, which may result in delayed operations, increased costs, and diminished profitability.
Recent studies have shown that companies with poor working capital management practices often face operational inefficiencies, reduced profitability, and increased financial distress (Olusegun & Adeyemi, 2025). Nasarawa Transport Company’s ability to balance its short-term assets and liabilities effectively will directly influence its operational costs and, ultimately, its financial performance. This issue has become increasingly relevant in recent years, as the company seeks to improve its financial standing amidst rising competition and operational challenges.
Given the importance of working capital management for the financial performance of Nasarawa Transport Company, it is vital to explore how its management strategies affect the company’s financial outcomes. This study will investigate the extent to which efficient working capital management practices can enhance the company’s ability to generate profits and maintain financial stability.
Statement of the Problem
The transportation industry in Nigeria, characterized by intense competition and rising operational costs, requires efficient management of working capital to maintain liquidity and profitability. Nasarawa Transport Company has faced challenges related to working capital management, which have affected its ability to meet its financial obligations and optimize profitability. The company struggles with maintaining an adequate balance between its short-term assets and liabilities, which has led to inefficiencies in operations, delayed services, and ultimately, a decline in financial performance.
Despite the importance of working capital management, there is a lack of focused research on how it directly impacts the financial performance of Nasarawa Transport Company. This research seeks to fill this gap by investigating the relationship between working capital management practices and the financial performance of the company. Understanding how factors such as cash management, receivables management, and inventory control influence the company’s bottom line is crucial for improving its financial stability and competitiveness.
This study is timely and relevant, as Nasarawa Transport Company seeks to enhance its financial management practices to improve its financial performance. The findings of this research will provide insights that could lead to better decision-making regarding working capital management, ultimately helping the company improve its profitability and sustainability.
Objectives of the Study
1. To evaluate the impact of cash management on the financial performance of Nasarawa Transport Company.
2. To assess the effect of receivables management on the financial performance of Nasarawa Transport Company.
3. To examine the influence of inventory management on the financial performance of Nasarawa Transport Company.
Research Questions
1. How does cash management affect the financial performance of Nasarawa Transport Company?
2. What is the impact of receivables management on the financial performance of Nasarawa Transport Company?
3. How does inventory management influence the financial performance of Nasarawa Transport Company?
Research Hypotheses
1. There is a significant relationship between cash management and the financial performance of Nasarawa Transport Company.
2. Receivables management significantly impacts the financial performance of Nasarawa Transport Company.
3. Inventory management has a significant influence on the financial performance of Nasarawa Transport Company.
Scope and Limitations of the Study
The study will focus on Nasarawa Transport Company and examine the impact of its working capital management practices on its financial performance. Data will be collected from the company’s financial reports and key stakeholders. The study will be limited to the period between 2023 and 2025, reflecting the most recent trends. A limitation of the study is that it will not account for external factors such as market conditions or government policies, which may also affect the company’s financial performance.
Definitions of Terms
• Working Capital Management: The management of short-term assets and liabilities to ensure the company has enough liquidity to meet its operational needs.
• Cash Management: The process of managing the company’s cash flows to ensure liquidity and operational efficiency.
• Receivables Management: The process of managing the company's outstanding customer payments to optimize cash flow.
• Inventory Management: The process of controlling and managing a company's inventory to ensure it is sufficient for operational needs without causing excess costs.
