IMPACT OF ASSET MANAGEMENT RATIO ON FINANCIAL PERFORMANCE: EVIDENCE FROM NIGERIAN MANUFACTURING COMPANIES

Abstract

The study examined the impact of Asset management ratio on the financialperformance of manufacturing companies in Nigeria. Specifically, the study examines theeffect of the asset Utilization Ratio, Asset Productivity Ratio and Current Asset Turnover Ratioon the Return on Assets. The study adopted the Ex-post factor research design. The mainsources of data for this study were secondary sources obtained from the online publication ofthe annual report of eighteen Nigerian manufacturing companies quoted on the Nigerian StockExchange in the year 2022. A sample size of eighteen (18) manufacturing companies whosefinancial statements were accessible online for the year 2022 was purposely taken. Theapproaches used to measure asset management are asset utilization ratio, asset productivityratio, and current asset turnover ratio, while financial performance is measured by profitabilityusing return on assets (ROA). A linear relationship was established between the Return onAsset (ROA), the dependent variable, and the independent variables, Asset Utilization Ratio(ASUR), Current Asset Ratio (CASR) and Asset Productivity Ratio (ASPR). The OrdinaryLeast Square Regression Model was used to express the model relationship between ROA andthe explanatory variables, ASUR, CASR and ASPR. Descriptive statistics were also employedto analyse the descriptive properties of the variables. The regression t-statistics results wereused to test the hypotheses at a 5% level of significance. Findings showed that the AssetUtilization Ratio has a significant effect on Return on Asset, while the Asset Productivity Ratioand Current Asset Turnover Ratio have an insignificant effect on Return on Assets. The studyrecommends that manufacturing companies should improve their asset management practicesin the areas of Asset Productivity Ratio and Current Assets to enhance their financialperformance.