CREDIT MANAGEMENT POLICY AND FIRMS? PROFITABILITY: EVIDENCE FROM INFANT MANUFACTURING FIRMS IN SOUTHWEST, NIGERIA

Credit management policy concerns managing debtors and financing debts. The higher the amount of debts not collected over a period of time, the higher the maintenance costs incurred which invariably impact on profitability. This study assessed the relationship between credit management policy initiatives and profitability among infant manufacturing firms in Southwest, Nigeria. The study adopted a descriptive research design. The convenience sampling technique was used to select ten (10) infant manufacturing firms and secondary data were extracted from annual reports of the selected firms over a period of ten (10) years(2009-2018). The data collected were analysed using descriptive and inferential statistics. The results of the study showed that there was an insignificant, positive relationship between Current Ratio (CR) and profitability at P>0.05; also, there exists an insignificant, positive relationship between Creditor's Payment Period (CPP) and profitability at P>0.05. However, Debtor's Collection Period (DCP) and profitability showed a significant, negative relationship at P<0.05. The study concluded that a favourable debtor's collection period is a precondition for improved profitability position. Therefore, it is recommended that a slightly tight debtor's collection strategy and procedure should be established as documented in this study so as to minimize the problem of cash flow and bad debt among infant manufacturing firms in Nigeria.