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 financial
performance of manufacturing companies in Nigeria. Specifically, the study examines the
effect of the asset Utilization Ratio, Asset Productivity Ratio and Current Asset Turnover Ratio
on the Return on Assets. The study adopted the Ex-post factor research design. The main
sources of data for this study were secondary sources obtained from the online publication of
the annual report of eighteen Nigerian manufacturing companies quoted on the Nigerian Stock
Exchange in the year 2022. A sample size of eighteen (18) manufacturing companies whose
financial statements were accessible online for the year 2022 was purposely taken. The
approaches used to measure asset management are asset utilization ratio, asset productivity
ratio, and current asset turnover ratio, while financial performance is measured by profitability
using return on assets (ROA). A linear relationship was established between the Return on
Asset (ROA), the dependent variable, and the independent variables, Asset Utilization Ratio
(ASUR), Current Asset Ratio (CASR) and Asset Productivity Ratio (ASPR). The Ordinary
Least Square Regression Model was used to express the model relationship between ROA and
the explanatory variables, ASUR, CASR and ASPR. Descriptive statistics were also employed
to analyse the descriptive properties of the variables. The regression t-statistics results were
used to test the hypotheses at a 5% level of significance. Findings showed that the Asset
Utilization Ratio has a significant effect on Return on Asset, while the Asset Productivity Ratio
and Current Asset Turnover Ratio have an insignificant effect on Return on Assets. The study
recommends that manufacturing companies should improve their asset management practices
in the areas of Asset Productivity Ratio and Current Assets to enhance their financial
performance.