Accounts Payable Administration and Profitability of Quoted Manufacturing Companies in Nigeria.

http://www.inosr.net/inosr-arts-and-humanities/
Ekpoese et al
INOSR ARTS AND HUMANITIES 9(1): 62-77, 2023
62
©INOSR PUBLICATIONS
International Network Organization for Scientific Research ISSN: 2705-1676
Accounts Payable Administration and Profitability of Quoted Manufacturing
Companies in Nigeria.
1
Ekpoese, John Dominic,
1
Akporien, Fidelis Olum and 2
Obiuwevbi, Ejiro Daniel
*Email: ekpoese09@yahoomail.com; +2347036471244
1
Department of Accounting, University of Uyo, Nigeria.
2
Department of Accounting, Ignatius Ajuru University of Education, Port Harcourt, Nigeria.
Corresponding Author: Ekpoese
ABSTRACT
This study was carried out to examine accounts payable administration and profitability of quoted
manufacturing companies in Nigeria with reference to consumer goods sector. This was motivated by
the desire to learn how proper administration of accounts payable enhances profitability in the wake
of the widespread corporate failures in Nigeria and the rest of the world. Accounts payable ratio and
short-term debt ratio were represented by accounts payable administration while return on assets was
used as proxy for profitability. The study used purposive sampling technique to extract data from the
annual reports of manufacturing companies quoted on the Nigerian Exchange Group Plc as of December
31st, 2022. Secondary data were gathered for the study. The study covered ten years’ time frame from
2013 to 2022. Descriptive and inferential statistics were used to examine the data specifically through
regression analysis. The outcome of the data analysis showed that accounts payable ratio has a
negligible negative influence on return on assets; short-term debt ratio significantly influences the
return on assets; the combined variables (accounts payable ratio and short-term debt ratio)
significantly influence the profitability of manufacturing companies in Nigeria. This implies that,
accounts payable ratio and short-term debt ratio influences the profit generated by manufacturing
companies in Nigeria considering it aggregate effect. It was advised that, sound and pragmatic
approach should be maintained in the administration of accounts payable in manufacturing companies
in order to positively influence the profitability of manufacturing companies in the country.
Administration of accounts payable should be carried out by financial expert in order to ensure that
financial obligation is met to vendors of goods and services when it is due. In order to ensure minimal
supply interruption and increase liquidity capacity, institutions should negotiate better terms of credit
with their suppliers and extend the accounts payment period.
Keywords: Accounts Payable Administration, Profitability and Quoted Manufacturing Companies.
INTRODUCTION
Businesses in the manufacturing industry
viewed profitability as the cornerstone of their
expansion. A company's profitability is
determined by comparing its profit against its
costs [1]. An organization's capacity is boosted
when producing more income by making use of
its available resources. The majority of the
time, a company's profitability appears to be
fluctuating as a result of poor administration in
the area of borrowed funds, especially accounts
payable [2]. Due to declining revenues, majority
of businesses recently reported deficits in their
financial statements, triggering a serious
financial crisis that could compel some of them
to halt operations [3]. Consequently, companies
in this sector must be on top of their accounts
payable administration in order to avoid cash
shortages that make it difficult for them to
make payments when they are due. If accounts
payable dearth is not the primary reason for the
failure of numerous companies, it has generally
been cited as the primary reason [4]. Because it
has an impact on the organization's
profitability, risk, and subsequently its value.
Therefore, accounts payable administration
remains very essential considering company
viability [5]. There is a risk-return trade-off
because the ideal level necessitates a balance
between profitability and solvency. In order to
avoid cash shortages that make it difficult for

63
companies to make payments when they are
due, businesses in this industry must stay on
top of their accounts payable administration. If
accounts payable shortage is not the main
factor in the demise of many businesses, it has
typically been cited as such [6]. Accounts
payable administration is still crucial for a
company's existence because it affects the
organization's profitability, risk, and ultimately
its worth. Because the ideal level requires a
balance between profitability and solvency,
there is also a risk-return trade-off. Accounts
payable administration goals increase
profitability by lowering the overall costs of
liquidity and the cost of illiquidity since they
are essential to accounts payable procedures
[7].
Accounts payable provide a significant portion
of the organization's funding, thus it is still best
to avoid a growth in this category. As a result,
the corporation can use free non-financial
resources for revenue through accounts
payable. The administration of accounts
payable is the most important aspect of an
organization's financial and economic
operations since it permits administration and
the development of a perfect schedule for on-
time debt repayment and the avoidance of
penalties from lenders. The efficient
administration of accounts payable is one of the
key responsibilities in the running of the
company. If there is a clear, well-established
system in place and thorough work is done with
accounts payable administration, the business
can use borrowed funds as efficiently as
possible and increase profitability [8]. Accounts
payable is one of the primary sources of
secured short-term financing. In addition to
having the correct level of preventions, a good
goal that needs to be emphasized is making use
of the advantages of the relationship with the
payee Therefore, a strong working relationship
between a company and its suppliers will
strategically improve production methods and
improve credit standing in the run-up to future
expansion. Effective cash positive purchasing
requires the involvement of creditors because it
begins with cash withdrawals and an
excessively aggressive purchasing function
might result in liquidity problems [9]. They are
sometimes referred to as suppliers who have
finished issuing invoices for goods or services
but have not yet been paid. The value increases
with the length of time it takes for enterprises
to pay their suppliers. Poor administration of
the company's payables may cause problems
that could be fatal for the enterprise. A
company can gain from stable operational
cycles, which offer it a dependable stream of
operating cash flows and place it in a better
liquidity position than its competitors, by
utilizing best practices for accounts payable
administration [10]. The broad phrase for a
company's collection of trade credit buy
management rules, procedures, and practices is
"suitable account payables administration."
This frequently entails the creditor performing
credit research, and the result of such an
examination usually is some sort of credit risk
assessment. However, effective administration
of accounts payable benefits in many ways,
including higher profits sales growth would
favourably elevate the marginal contribution
proportionately more than the additional costs
connected with such an increase, which in turn
would ultimately increase the level of profit of
the business. This is because accounts payable
will increase the purchasing power. As a result,
a company might turn to lending money [11].
Accounts payable refers to customers who have
consented to or have already given the
institution with products and services on credit
terms. To maintain a sufficient level of credit
and control over the accounts payable,
organizations embrace the idea of accounts
payable strategies. Regular responsibilities for
credit analysis, credit classification, rating, and
reporting to the organization's decision-making
arm are involved [12]. Buying institutions may
be concerned about supply delays, lax quality
standards, and subsequent cash flow issues as
a result of a greater reliance on suppliers.
However, a lot of companies think that supplier
evaluation doesn't actually matter because
politics and price are so important in deciding
which products to buy. On the other hand, for
some companies, a superior supplier's
performance may immediately integrate the
most recent technical breakthroughs into the
purchasing institution's own products and
result in a better product's quality through
early supplier participation. In order to
establish homogeneity in the evaluation, it is
required to conduct supplier evaluation using
predetermined criteria [13]. This will boost the
buying institution's liquidity capacity. The
development of acceptable criteria that take the
interests of the bargain shopper into
consideration is one indicator of how effective
the procurement process is. Everyone believes
that choosing the appropriate criteria for
supplier evaluation and selection has a

64
substantial impact on the institution's liquidity.
There are three factors often used to evaluate
suppliers, namely; price, quality, and delivery.
Relatively recent advancements in supplier
selection advocate the use of several criteria
models for supplier evaluation. Some of the
criteria used to assess suppliers include
financial capacity, quality, manufacturing
facilities, environmental considerations,
supplier's organizational culture, cost
considerations, production capacity, and
personnel competencies [14].
Effective accounts payable administration plays
a crucial role in the overall business strategy to
increase shareholder value by defining the
composition and quantity of investments on
current assets, as well as the level, sources, and
mix of short-term borrowing. Particularly
efficient accounts payable administration can
provide a company an edge over rivals by
enabling it to react to unforeseen changes in the
economy honestly and quickly. In essence,
efficient accounts payable administration aims
to keep the perfect ratio between profitability
and risk. For a business to be profitable,
financial managers must be able to properly
manage accounts payable [15]. Accounts
payable administration is frequently done in a
comprehensive manner without taking certain
factors into consideration. Because of this, it is
now very difficult to evaluate accounts payable
in terms of an enterprise's profitability.
However, this location has left a void in the
literature on accounts payable. The few studies
that have been done on accounts payable have
focused on different investigations,
perspectives, concepts, and different variables,
but this research would be distinctive in that
individual and combined objectives would be
tested for their influence on various variables
using simple and multiple regression analyses.
The analysis of the accounts payable
administration and profitability of quoted
manufacturing companies in Nigeria is the main
goal of this study. For analytical purposes, the
study's presumptions are divided into the
following hypotheses.
Ho1: There is no significant influence of
accounts payable ratio on return on assets of
quoted manufacturing companies in Nigeria.
Ho2: There is no significant influence of short-
term debt ratio on return on assets of quoted
manufacturing companies in Nigeria.
Ho3: There is no combined significant influence
of accounts payable ratio and short-term debt
ratio on return on assets of quoted
The manufacturing companies are the primary
subject of this investigation with specific
reference to consumer goods sector in Nigeria.
For the fiscal years 2013 through 2022, return
on assets served as a proxy for profitability.
The ratio of accounts payable and the ratio of
short-term debt were used as independent
variables for the relevant years in the segment
on accounts payable administration.
THEORETICAL FRAMEWORK AND LITERATURE REVIEW
Previous researches have explored a number of
ideas as the theoretical basis for profitability
and deciding element including agency theory,
pecking order theory and stewardship theory
respectively. Given its factors, it is believed
that agency and pecking order theories are the
most suitable for this research. The
profitability of a business and the ability to
function are explicitly supported by agency
theory. In the same vein, pecking order theory
proffer an adequate backing to the study.
Therefore, the agency theory and pecking order
theory were adopted for the study. Agency
theory provides a believable explanation for the
relationship between accounts payable
administration and manufacturing company
profitability in Nigerian environment. Stephen
A. Ross and Barry M. Mitnick independently
developed this idea in the early 1970s. Stephen
A. Ross developed the economic theory of
agency and reported his findings in the
American Economic Review proceedings in May
1973. Barry M. Mitnick's institutional theory of
agency was introduced at the 1973 American
Science Association annual meeting and
afterwards made available on microfilm.
Despite the similarities in their core concepts,
Barry M. Mitnick and Stephen A. Ross
established the common logic of agency in
institutional settings. The principal's suggested
behaviour never occurs because it is pointless
to make everything perfect. Nevertheless,
society has created systems to deal with these
defects, either by buffering them or modifying
to be more chronically distorted by them [17-
19]. A variety of social behaviour can be
explained using this all-encompassing
approach, along with pertinent justifications. A
party (the principal) appoints a different party
(the agent) to carry out particular
responsibilities on their behalf while
simultaneously granting the agent some
decision-making ability, according to agency
theory. The most well-known instances of

65
agency relationships are probably those
between employers and employees. Others are
the CEO, the stockholders, the elected
constituency representative, the ambassador of
the state, and the agent. In this study, the local
employees are stressed as the agent, while the
electorate, or shareholder, is emphasized as the
principal. The employees are supposed to show
exceptional management of the resources
entrusted to them by providing the
shareholder’s goods and services, the basic
inhabitants need. One of the issues with this
theory is the paradox that while the principal
and agent usually work for the same objective,
they might not always have the same interests
[20]. The literature on this subject consequently
mostly focuses on the systems and techniques
that are employed to attempt to align the
interests of the principal and actor, as well as
the effects that follow those activities. Since
the 1970s, no other theory of agency has been
advanced other from the one independently put
forth by Stephen A. Ross and Barry M. Mitnick.
The principle and agent dilemma were first
considered by Adams Smith in a corporate
framework in the 18th century, and many of its
fundamental ideas were later elaborated in
literature.
The Peckings Order Theory, as modified by [21-
22], functioned as the supporting theory in a
similar vein. The concept underlines the
importance of internally managed liquid assets
and the requirement for cash holdings for
performance enhancement. The idea contends
that corporations favour retained earnings
above other readily available liquid assets
because they are the simplest to obtain as a
source of funding for investments [23]. The use
of internal resources or the least expensive
resources available to the company is the main
focus of this idea. According to the pecking
order theory, the order of resources takes
precedence above their magnitude. As a result,
businesses prefer internal finance when it is
adequate, turn to borrowing when it is not, and
as a last resort, turn to external financing
through shares. A new pecking order theory,
however, has been established for
industrialized nations and is defined by a
reevaluation of the financing preference, which
results in retained earnings, equity, and finally
long-term debt. Pecking order theory, in a
nutshell, emphasizes the significance of the
concept of liquid assets. In contrast, pecking
order supports a strong link between
profitability and liquid assets [24]. Thus,
agency and peckings order theories serves as
the foundation for this investigation.
Receipts to be made managing their daily
operations brings about administrative issues.
The majority of businesses seek to pay their
suppliers for the goods and services they get in
the near future. Normally, cash payments are
made after the goods and services are supplied
on credit for these purchases [25]. As a result,
the purchaser is left with liabilities or
obligations to make payments in the near future
as a result of these transactions. Accounts
payable is the name of these liabilities.
Accounts payable are the commitments that
represent expenditures and it is the company's
duty to pay for products and services that have
been delivered but for which invoices have not
yet been received. A business that follows best
practices for managing accounts payable can
benefit from stable operating cycles, which give
it a reliable stream of operating cash flows and
put it in a better liquidity position than its
rivals. Accounts payable administration is the
umbrella term for a company's set of trade
credit management policies, methods, and
practices [26]. This often involves the
creditor's (payables) credit examination. A
credit risk rating of some kind is typically the
outcome of such investigation. The company's
financial accounts are examined, with a focus
on working capital, short-term liquidity, and
short and long term debt to determine its
capacity to satisfy obligations. According to
[27], consumers who are willing to or have
already provided the institution with goods and
services on credit terms are referred to as
accounts payable. Using the concept of
accounts payable as a basis, organizations
implement measures to make sure they
maintain an adequate level of credit and
oversight of the accounts payable. This entails
regular obligations for credit analysis, credit
classification, ratings, and reporting to the
organization's decision-making arm. Increased
reliance on suppliers may cause issues for
buying institutions, such as supply delays, poor
quality standards, and consequent liquidity
issues. According to [28], many companies
believed that, supplier evaluation has little
impact on purchasing decisions because
politics and pricing play a major role in these
decisions. However, for some businesses, a
superior supplier's performance may quickly
integrate the newest technical advance into the
buying institution's own products and result in
greater quality through early supplier

66
involvement. As a result, the purchasing
institution's liquidity capacity will increase
[29].
In order to achieve homogeneity in the
evaluation, it is necessary to conduct supplier
evaluation using predetermined criteria. One of
the indications of procurement performance is
the creation of acceptable criteria that take the
interests of the bargain hunter into account
[30]. Everyone agreed that the institution's
finances are significantly impacted by the
selection of the proper criteria for supplier
evaluation and selection. Cost, quality, and
delivery have historically been the three criteria
used to evaluate suppliers. Multiple criteria
models for supplier evaluation are encouraged
by relatively recent advancements in supplier
selection [30]. Financial capability, quality,
production facilities, environmental concerns,
supplier's organizational culture, cost
variables, production capacity, and staff
capabilities are some of the characteristics used
to evaluate suppliers [31]. By establishing the
composition and level of investments on
current assets, the level, sources, and mix of
short-term debts, an effective accounts payable
administration plays a vital role in overall
corporate strategy to improve shareholder
value [32]. Particularly effective accounts
payable management can help a business
respond quickly and honestly to unforeseen
changes in the economic environment and
provide it a competitive edge over rivals [33].
The main goal of effective accounts payable
administration procedures is to provide the
best possible balance between profitability and
risk. The components of accounts payable can
be continuously monitored to attain this goal.
Financial managers' ability to do their jobs well
is crucial to a company's performance [11,17].
One of the main sources of secured short-term
finance is accounts payable. Utilizing the value
of the relationship with the payee is still a good
goal that needs to be emphasized as much as
having the ideal degree of preventions. As a
result, a solid partnership between a firm and
its suppliers will strategically enhance
production processes and increase credit
standing in preparation for future growth.
A crucial component of efficient cash flow is the
creditor (payables). Positive purchase initiates
cash outflows, and an overly aggressive
purchasing function can lead to financial
difficulties. The amounts owed by businesses
to their suppliers are represented by accounts
payable. They are also known as suppliers that
have completed invoices for products or
services but have not yet received payment. The
longer it takes for businesses to fulfill their
payment obligations to their suppliers, the
higher the value. Poor administration of a
company's accounts payable can result in
issues that could end in calamity [18,20]. [14],
defined accounts payable as the supplier whose
payment for goods or services has been
processed but who has not yet been paid.
Accounts payable was classified into trade
credit and accrued expenses which together
provide finance to the operations of a business
on an on-going basis. Firms would rather sell
for cash than on credit, but competitive
pressure forces most companies to offer trade
credits. Unlike credit from financial
institutions, trade credit does not rely on
formal collateral but on trust and reputation [9]
In order to measure the impact of accounts
payable to firm profitability, the ratios such as
accounts payable ratio, short-term debt ratio,
payables to net profit margin ratio and payables
to assets ratio can be utilized. The accounts
payable ratio is measured by dividing payables
with the cost of sales during a time period.
Short term debt ratio is represented by dividing
short liabilities with total assets of a firm. The
accounts payable to net profit margin ratio
measures accounts payables relative to profit
margin, while accounts payables to assets ratio
analyses the proportion of assets financed by
accounts payable [13]. Other researches could
measure accounts payable administration
through, Payables turnover ratio which is
measured by dividing cost of goods sold by
average inventory at the end of the financial
year. Payables to net profit margin ratio,
measured by dividing average payables amount
by the profit for the year while Payables to
assets ratio could be measured by dividing
average payables with total assets [19].
Accounts payable administration includes a
variety of roles in businesses. It represents a
company's legal responsibilities that arise
during the normal course of business as a short-
term liability. Liabilities are items that show up
on a company's statement of financial condition
and can be either current or non-current.
Accounts payable and notes payable are two
typical liabilities included on an organization's
statement of financial status. Notes payable are
categorized as a non-current liability, while
accounts payable are categorized as a current
liability. In order to handle its finances
efficiently, a corporation must comprehend the

67
significance of accounts payable and notes
payable. Contrary to the previous century,
accounts payable now significantly affects the
company's financial operations. Receiving
additional funds for necessities but later
returning them has become a crucial
component of the enterprise's operations. Quite
a few internal and external variables are
currently having a detrimental impact on the
performance of businesses. In the end, this
causes solvency to gradually decline. The
creation of agricultural firms has made it
feasible to address this issue by assisting in
maximizing the degree of solvency and
enhancing operations without going against
existing legal constraints. Accounts payable are
obligations that a firm has under a specific time
frame to repay other organizations and
individuals for previously carried out activities
(events). The working capital of businesses is
substantially impacted by the availability of
payable businesses. Another chance for short-
term funding is provided by the enterprises'
slow repayments. Most of the time, businesses
resolve questions regarding the nature,
frequency, and format of supplier payments on
their own. Companies are attempting to fulfill
their financial commitments in relation to
payments to the budget and banks as it relates
to the imposition of fines for violations of both
the timing and amounts of payments.
Therefore, the existence of payables shows that
businesses predominantly blame their
suppliers for their financial issues. One specific
form of debt capital is the company's holdings
of accounts payable. It results from the fact that
the corporation is late in meeting its financial
obligations because some money is
momentarily delayed in economic turnover.
Every late payment can frequently have a
significant impact for many small firms.
For this reason, managing the accounts payable
side of the business ledger effectively is crucial
for entrepreneurs and small business owners.
Unpaid bills or late payments can quickly
snowball into serious credit issues that can
seriously impair a company's ability to operate.
The method used to estimate the non-current
and current assets, such as land and
inventories, which are part of gross assets,
determines the level of debt. The enterprise's
actual source of financial resources can be
viewed as payable in the form of advances
received. A payable for products, works, and
services is the origin of the formation and the
direction of the placement of financial
resources. Other sorts of payables debt cash are
sources of financial resources, subject to the
debt for failure to pay money, not a true dearth
of them [20]. To improve accounts payable
subject to automation, the following actions
must be taken, namely; use software design
based on the integration of function modules
with subsystems related to financial and
operational aspects of management; create a
database for participants in payables
settlement; compare the electronic form of
mutual requirements and obligations and find
the most logical methods of repayment of
mutual debts; hold offsets, gradually reducing
the amount of debt; lead accounting and
reporting of the carried out payments [25].
Accordingly, accounts payable organizations
and institutions to other people and businesses,
the tangible assets, works, and services
received; the amount of advances received from
other people due to these supplies of goods,
works, or services; all types of payments to the
budget, including taxes from workers; arrears
of wages, including wages deposited; arrears
interdepartmental settlements; other
receivables under current liabilities. The
accounts payable department of every type of
business is crucial since it helps to order
information, make data transactions on debt
(creditors) transparent, and ensure their
accuracy. The key to its continued economic
and financial progress is achieving a proper and
sustainable financial status. Positive accounts
payable and correctly planned work on its
management are suggested as one of the
indications for a sustainable financial situation
in terms of competitiveness by best practices.
The state and amount of the company's
available funds, its ability to ensure the
creation of cash flows, its effective
administration of its receivables and payables,
inventory optimization, policy financing of
assets, and other factors all play a role in its
level of solvency. The ability to pay the
available cash and the absence of outstanding
payables are hence characteristics of a
company's solvency, and they play a significant
part in that, accounting for accounts payable
involves considering its potential for
harmonization, the relevance of the function to
the businesses, and the direct effects it has on
individuals and organizations around the
world. Concerns regarding how accounts
payable factors could impact a company's
profitability are growing. Notably, prior study
did not analyze the profitability of

68
manufacturing organizations; instead, it
examined a number of accounts payable
indicators that had an impact on a number of
variables. However, the study divides accounts
payable administration into a number of
indices, including the ratio of payables, the
short-term debt ratio, and the rate of revenue
growth. The measures are therefore described
in full below.
Accounts payable ratio
This ratio relates to vendors that have
processed their invoices for products or
services but have not yet received payment.
One specific form of debt capital is the
company's holdings of accounts payable. It
results from the fact that the corporation is late
in meeting its financial obligations because
some money is momentarily delayed in
economic turnover. Every late payment can
frequently have a significant impact for many
small firms. For this reason, managing the
accounts payable side of the business ledger
effectively is crucial for entrepreneurs and
small business owners. Unpaid bills or late
payments can quickly snowball into serious
credit issues that can seriously impair a
company's ability to operate. The method used
to estimate the non-current assets and current
assets, such as land and inventories, which are
part of gross assets, determines the level of
debt. The enterprise's actual source of financial
resources can be viewed as payable in the form
of advances received.
Accounts payable for products, works, and
services is the origin of the formation and the
direction of the placement of financial
resources. Other sorts of payables debt cash are
sources of financial resources, subject to the
debt for failure to pay money, not a true dearth
of them [21]. This variable represents the
payable that the firm will pay to its customers
[9]. Apply software design based on the
integration of function modules with
subsystems related to financial and operational
aspects of management. Create a database of
participants in payables settlement. Compare
the electronic form of mutual requirements and
obligations. Find the most logical methods of
repayment of mutual debts. Hold offsets,
gradually reducing the accounts payable mal-
function. Due to the fact that the ability to pay
with available funds and the absence of
outstanding payables are two characteristics,
accounts payable play a significant part in the
solvency of businesses. Accounts payable
divided by cost of sales is the formula used in
this study to determine accounts payable ratio.
Short -Term Debt Ratio
This ratio denotes a circumstance where a
business is financed by a short-term loan [7]. By
assessing the cost of the debts, which affects
corporate profitability, businesses decide how
much short-term debt financing they need to
use. When the rate of return on investment is
higher than the cost of debt, however,
enterprises have favourable leverage. Because
dividends are not tax deductible whereas
interest payments to short-term holders are,
short-term debt may be less expensive to issue
than more shares. As a result, the utilization of
short-term debt may boost stockholder
earnings through advantageous financial
leverage. To assess the firm's ability to use
short-term debt to the benefit of shareholders
and the level of financial risk, short-term debt
ratios can be calculated. The smaller the ratio,
the lesser the company's financial risk. A short-
term debt ratio below 60% is seen as safe for
most organizations because it shows that the
company or corporation owes only 60% for
every N1.00 in total assets, whereas a short-
term debt ratio larger than 60% is considered to
be quite high [11]. In this study, the ratio of
short-term liabilities to total assets serves as a
proxy for short-term debt.
Revenue Growth Rate
This indicator assesses the sales team's
capacity to boost revenue over a predetermined
time frame. Executives and the board of
directors consider revenue growth as a strategic
indication when making decisions, and it has an
impact on the creation and implementation of
business plans. The metric utilized to gauge
how well the sales team performed in boosting
revenue over a defined time period was revenue
growth. A crucial factor in the company's
survival and financial development is revenue
growth. Good Revenue growth is always put to
use for the benefit of the workers and the
business, whether it be through wage increases,
the purchase of new assets, business
development, or the addition of new products.
A plan or action is constrained if its revenue
growth is negative. The major objective of
executives in large corporations is to maximize
revenue in order to maintain that rise over the

69
long and short terms, even at the risk of lesser
profitability [3]. With the goal of substituting a
minimal profit constraint for profit
maximization as the objective of large business
firms, Baumol added to the growing body of
oligopoly theory. This is the percentage rise or
reduction in annual sales. The rate of the
difference between the current year's revenue
and the prior year's revenue divided by the
prior year's revenue is used in this study to
calculate revenue growth. Measuring the
effectiveness of accounts payable
administration has interested researchers a lot.
Numerous studies employ questionnaires and a
variety of independent variables to measure
accounts payable administration.
For instance, the effect of accounts payable
administration on financial performance of
public universities in Kenya was studied by
Kithinji, Wephukulu, Gekara, and Mwanzia in
2022. The financial performance of Kenyan
universities was recently deteriorated to the
point where the majority of them have declared
deficits in their income statements. As a result
of the dropping earnings, universities were
currently experiencing a severe financial crisis
that may cause some of them to shut down. 11
universities were deemed insolvent by the
Auditor General in a report to the legislature for
the fiscal years 2017 to 2018. The authors
stated for organizations to survive, such
organization must handle its accounts payable
properly to survive. This was due to the
possibility that an institution's inability to
perform may be caused by its inability to
recognize pertinent accounts payable
administration procedures. This study's main
goal was to determine the impact of accounts
payable management on the financial
performance of public universities in Kenya.
The following independent variables served as
the study's guides; the impact of accounts
payable turnover management on the financial
performance of public universities in Kenya,
the impact of accounts payable day ratio
management on the financial performance of
public universities in Kenya, and the impact of
coverage ratio management on the financial
performance. Trade-off theory, operational
cycle theory, and liquidity theory served as the
study's pillars. The study's focus was on
Kenya's public universities during the years
2016 and 2019. The research did a thorough
examination of the existing literature and a
quantitative research design was employed. 31
accredited public universities in Kenya made up
the study's sample. The auditor general's office
provided the secondary data that was gathered.
The study discovered that the financial
performance of Kenya's public universities is
impacted by the management of accounts
payable turnover, accounts payable day ratio,
and coverage ratio as metrics of accounts
payable both collectively and individually.
According to the report, enrollment affects how
public universities in Kenya manage their
accounts payable and how financially
successful they are. According to the
coefficient of determination R2 = 0.563,
changes in the accounts payable administration
of Kenya's public universities account for 53.6%
of the variation in financial performance. The
study came to the conclusion that financial
performance of Kenya's public universities is
significantly influenced by accounts payable
management. In order to have a strong financial
performance, the study advised that all public
institutions adopt good accounts payable
management. In order to facilitate
generalization, it is also advised that more
study be conducted on private universities in
Kenya.
In 2020, Kadochnikova, Zulfakarova, and
Rahimov did a study on the evaluation of
enterprise accounts payable in light of
econometric and environmental factors. By
taking into consideration environmental
concerns in the digital age and building a linear
model of trade accounts payable multiple
regression based on its financial indicators.
From January 2016 to December 2019, the
authors employed a sample of monthly non-
stationary time series with a deterministic
trend. By focusing on the variations in the
starting levels, the time series were
transformed into a stationary form and used to
construct the regression. The relationship
between accounts payable and the financial
indicators, including the turnover ratio of
accounts payable's, receivables and a
percentage of own working capital, was
discovered. The notion that accounts payable
and the company's gross profit were related
was not supported by evidence. Fisher, Student,
Durbin-Watson, and White tests were used to
confirm the validity of the results. The findings
of the generated empirical estimates supported
the viability of using this approach in practice
to predict and forecast the company's accounts
payable. Accounts payable was optimized by
the organization by using forecasting to create
a budget for receipts and payments. The

70
prediction, according to the authors, was to
enable controlling the amount of accounts
payable by modifying the debt's maturity.
Sharma (2017) investigated the administration
of account payables in a few Indian fast-moving
consumer goods companies. Fast-moving
consumer goods businesses in India were all
taken into account. Five workers from
businesses that produce quickly consumed
commodities were examined. The financial data
sampling size was based on data from the
aforementioned five fast-moving consumer
goods corporations for ten years. Non-
probability sampling technique known as
judgment sampling was used. Secondary
information was gathered and examined. The
websites of the aforementioned fast-moving
consumer goods companies were used to
collect information on financial statements
from 1st April 2007 to 31st March 2017.
Britannia had a high accounts payable turnover
percentage in terms of money. Additionally, of
all the businesses included in the analysis, it
had the highest. If a higher volume of accounts
payable turnover is acceptable for a corporate
organization, a higher value of accounts
payable turnover showed that the company is
proficient at promptly settling its short-term
liabilities. The nature of the firm, production
policies, and other factors that must be taken
into account when calculating the requirement
for liquidity were considered as an aspect of the
study.
In a case study of [11] investigated the effects
of impact of investment on firm performance in
Kenya. An ex-post facto research design was
employed in the study. The availability of the
data affected the sample size. Secondary data
from the yearly report and statement of
accounts of the companies under study were
used in the research. Results showed that
operational effectiveness and impact
investment in Jamii Bora Bank have a very high
positive link. A rise in impact investment is
correlated with a rise in operational efficiency.
According to the results, operational
effectiveness accounts for 77.3% of the
variation in impact investment at Jamii Bora
Bank.
[14], conducted research on how listed
manufacturing enterprises' financial
performance was impacted by the use of
accounts payable as a source of funding. The
research design used was cross-sectional and
quantitative approach was used to test the
relationships that were utilized in the research
between the independent and dependent
variables. Information was gathered all at once.
Census sampling method was applied and
secondary data was gathered from the financial
statements and journals of the companies that
were located at the Nairobi Securities Exchange.
With the use of SPSS, the variables' descriptive
analysis, critical analysis, and advanced
analysis were conducted. In order to investigate
the relationship between accounts payable and
business success, a multiple regression model
was used. The study's findings demonstrated
that most of the companies listed on the NSE
had an accounts payable relationship that was
directly positive with the dependent variables,
profitability and liquidity. The research did not
take into account the provided discount or its
impact on liquidity.
In their 2016 study, Duru and Okpe explored
the impact of accounts payable administration
on the financial results of Nigerian domestic
and industrial manufacturing firms. This study
used an ex-post facto research approach as its
methodology. This was because, it made use of
prior years' worth of events. All of Nigeria's
residential and industrial product
manufacturing businesses made up the study's
population. The availability of the data affected
the sample size. Only secondary data from the
yearly report and statement of accounts of the
companies under study were used in the
research. Accounts payable turnover, long-term
debt, and profit before taxes were among the
variables used in the study. The study
demonstrated a statistically significant positive
relationship between the ratio of accounts
payable and profitability. The study also
revealed that profitability of the enterprises
that were the subject of the study was
significantly and positively impacted by both
the debt ratio and the pace of sales growth. The
study made use of secondary data that was
already in the public domain and had been
acquired. Unlike primary data, which comes
from first-hand sources.
[9] conducted research on the connection
between investments and the financial success
of Kenyan insurance companies. An ex-post
facto research design was employed in the
study. According to the survey, insurance
companies in Kenya allocate their assets to
three well-liked sectors. The availability of the
data affected the sample size. Only secondary
data from the yearly report and statement of
accounts of the companies under study were
used in the research. These comprise

71
investments in government securities, deposits
with other financial institutions where the
companies hold certificates of deposits, and
investments in real estate, which represents the
majority of total assets in the Nigerian oil and
gas industry,
[26] examined the connection between working
capital management and business profitability.
An ex-post facto research design was used in
the study. The study's foundation was
secondary data gathered from a sample of two
publicly traded oil companies in Nigeria from
1995 to 2011. The cash conversion cycle,
average days' receivables, average days'
payables, and average days' inventory are the
working capital management components that
have the greatest impact on a firm's
profitability in Nigeria. According to the results
of correlation analysis and ordinary least
square estimation approach, it was discovered
that the firm's size has a significant factor that
influences its profitability while other variables
did not.
[9] carried out a study on the relationship
between working capital management and
profitability of listed companies in Nairobi
securities exchange. The objectives were to
establish how efficient the firms are managing
their working capital; establishing the
relationship between profitability, the cash
conversion cycle and its components for the
listed companies in the Nairobi securities
exchange for the period 2001 - 2006. The
results showed that there is a statistically
significant negative relationship between
indicators of working capital management and
the profitability of firm except for the average
payment period which showed a positive
relationship.
METHODOLOGY
The study employed an ex-post facto research
design. To evaluate the statistical correlation
between and among the study's variables, this
method used previously gathered data. The 10
manufacturing companies that were listed on
the Nigerian Exchange Group Plc as of
December 31, 2022 were included in the
research population. Using the purposive
sample method, ten manufacturing enterprises
were chosen as the study's population based on
the accessibility and availability of their annual
reports throughout the investigation. 91 sample
points from the study were considered. The
study's secondary data came from publicly
available yearly reports and accounts of
Nigeria's consumer goods sector. The data used
in the study came from secondary sources. The
data, which were both discrete and continuous,
were obtained from the annual reports of the
sampled organizations using a content analysis
technique. The variables of relevance for the
study were divided into dependent and
independent variables, which are the two main
groups. The dependent variable for the study
was the profitability of manufacturing firms in
Nigeria as measured by return on assets. The
accounts payable administration, measured by
accounts payable ratio and short-term debt
ratio, of Nigerian manufacturing enterprises
served as the study's independent variables.
In order to test the stated hypotheses, three
functional relationships based on simple and
multiple regression analyses were developed in
general form as follows:
y = f(x) - - -
- - - - equation 1
Where, y is the profitability measured by return
on assets, x is accounts payable administration
measured by accounts payable ratio and short-
term debt ratio respectively. In a functional
form, it was stated as;
ROA = f (APR) - Hypothesis One
ROA = f (STDR) - Hypothesis
Two
ROA = f (APR & STDA)- Hypothesis
three
Substituting profitability and Account payable
administration variables in a regression
statistics equation, the following model are
developed thus;
ROAit = Yo+ Y1 (APR)it+ eit - -
equation one
ROAit = βo + β1(STDR)it+ eit - - -
equation two
ROAit = Ώo+ Ώ1 (APR & STDR)it + eit - -
equation three
Where:
ROA = Return on Assets
Y0, βo, Ώo = Constant Terms
Y1, β1, Ώ1 = Estimated Coefficients of the
independent variables
APR = Account payable Ratio
STDR = Short-term Debt ratio
e = Error term
i = Number of banks
t = Number of years

72
DATA ANALYSIS AND FINDINGS
This section presents the descriptive and inferential statistics of the study.
Table 1:Descriptive Statistics
N Minimu
m
Maximu
m
Mean Std.
Deviation
Skewness Kurtosis
Statisti
cs
Statistic
s
Statistic
s
Statistics Statistics Statistic
s
Std.
Error
Statis
tics
Std.
Error
Profitability-
ROA(%)
100 -.130 .810 .05950 .103127 4.081 .241
27.85
2
.478
APR 100 .008 555.248 17.16197 68.486497 5.743 .241
39.71
0
.478
STDR 100 .140 5.370 .50810 .625065 6.301 .241
43.96
0
.478
Valid N
(listwise)
100
Source: Researcher’s Analytical Output (2023)
Table 1 shows the descriptive statistics of the
variables used in the study. Profitability was
proxied by return on assets which served as the
dependent variable of the study. The table
depicted a minimum, maximum, mean and
standard deviation of -0.130%, 0.810%,
0.05950% and 0.103127% respectively with the
mean deviating from the standard deviation by
0.043627%. The coefficient of skewness of
4.081% positively skewed, indicating a normal
distribution of the data set and the kurtosis of
27.852% was leptokurtic in nature hence meet
the acceptable criteria. Accounts payable ratio
indicated the minimum, maximum, mean and
standard deviation of 0.008, 555.248, 17.16197
and 68.486497 respectively with the mean
deviating from the standard deviation by
51.324527. The coefficient of skewness of
5.743 was positively skewed implying a normal
distribution of the data set and the kurtosis of
39.710 was leptokurtic and meet the acceptable
criteria. Short term debt ratio indicated the
minimum, maximum, mean and standard
deviation of 0.140, 5.370, 0.50810 and
0.625065 respectively with the mean deviating
from the standard deviation by 0.116965. The
coefficient of skewness of 6.301 was positively
skewed implying a normal distribution of the
data set and the kurtosis of 39.710 was
leptokurtic, thus meeting the acceptable
criteria.
Ho1: There is no significant influence of
accounts payable ratio on return on assets of
Source: Researcher Analytical output (2023)
Table 2:Model Summaryb
Model R R Square Adjusted R Square Std. Error of the
Estimate
Durbin-
Watson
1 .006a
.000 -.010 .103650 1.101
a. Predictors: (Constant), Accounts Payable Ratio. b. Dependent Variable: Return on Assets
Table 3:ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression .000 1 .000 .003 .954b
Residual 1.053 98 .011
Total 1.053 99
a. Dependent Variable: Return on Assets. b. Predictors: (Constant), Accounts Payable Ratio

73
Table 4. Coefficientsa
Model Unstandardized
Coefficients
Standardize
d
Coefficients
t Sig. Collinearity Statistics
B Std.
Error
Beta Toleranc
e
VIF
1
(Constant
)
.060 .011 5.581 .000
APR -8.746E-006 .000 -.006 -.057 .954 1.000 1.000
a. Dependent Variable: Return on Assets
Table 3, presents the summary of the influence
of accounts payable ratio on return on assets of
quoted manufacturing companies with
The R2
of 0.000 indicated the rate that account
payable ratio contributed to return on assets of
Table 4, showed a p-value of 0.954 > 0.05. This
indicates that there is no significant influence
of account payable ratio on return on assets of
Table 5 shown a better coefficient of -0.006 of
account payable ratio implying that, if other
variables are held constant, as account payable
ratio increases, return on assets decrease in
that magnitude. A N1.00 increase in account
payable ratio would lead to a N-0.006 decrease
in return on assets.
Ho2: There is no significant influence of short-term debt ratio on return on assets of manufacturing
companies in Nigeria.
Model R R Square Adjusted R
Square
Std. Error of
the Estimate
Durbin-Watson
1 .552a
.305 .298 .086418 .941
a. Predictors: (Constant): Short Term Debt Ratio. b. Dependent Variable: Return on Assets
Table 6:ANOVA
Model Sum of
Squares
Df Mean Square F Sig.
1
Regression .321 1 .321 42.984 .000b
Residual .732 98 .007
Total 1.053 99
a. Dependent Variable: Return on Assets. b. Predictors: (Constant), Short Term debt ratio
Table 7:Coefficientsa
Model Unstandard
ized
Coefficients
Standardi
zed
Coefficien
ts
T Sig. Collinearity Statistics
B Std.
Error
Beta
Tolerance
VIF
1
(Consta
nt)
.013 .011
1.18
4
.23
9
STDR .091 .014 .552
6.55
6
.00
0
1.000 1.000

Ekpoese et al
74
of short- term payable ratio on return on assets
of quoted manufacturing companies with
The R2
of 0 .305 indicated the rate that short-
term payable ratio contributed to return on
assets of quoted manufacturing companies with
Table 6, showed a p-value of 0.000 < 0.05. This
indicates that there is a significant influence of
short- term payable ratio on return on assets of
Table 7, shown a better coefficient of 0.552 of
short-term payable ratio implying that, if other
variables are held constant, as short-term
payable ratio increases, return on assets
increase in that magnitude. A N1.00 increase in
account payable ratio would lead to a N0.552
decrease in return on assets.
Ho3: There is no combined significant influence
of accounts payable ratio and short-term debt
ratio on return on assets of manufacturing
companies in Nigeria.
Mod
el
R R
Square
Adjusted
R Square
Std. Error
of the
Estimate
Durbin-Watson
1 .553a
.306 .292 .086787 .945
a. Predictors: (Constant): Accounts Payable Ratio and Short-Term Debt Ratio. b. Dependent
Variable: Return on Assets
b. Source: Researcher Analytical output (2023)
Table 9: ANOVAa
Model Sum of Squares Df Mean Square F Sig.
1
Regression .322 2 .161 21.394 .000b
Residual .731 97 .008
Total 1.053 99
a. Dependent Variable: Return on Assets. b. Predictors: (Constant), Accounts Payable Ratio
and Short- term Debt Ratio.
Table 10:Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. Collinearity
Statistics
B Std. Error Beta Toleran
ce
VIF
1
(Constan
t)
.012 .012 1.049 .297
APR 5.237E-005 .000 .035 .410 .683 .995 1.005
STDR .092 -014 .555 6.541 .000 .995 1.005
of accounts payables ratio and short-term
payable ratio on return on assets of quoted
manufacturing companies with reference to
consumer goods sector in Nigeria. The adjusted
R2
of 0 .292 indicated the rate that accounts
payables and short-term payable ratios
contributed to return on assets of quoted
manufacturing companies with reference to
consumer goods sector in Nigeria. Table 9,
showed a p-value of 0.000 < 0.05. This indicates
that there is a significant joint influence of
account payable and short-term payable ratios
on return on assets of quoted manufacturing
companies with reference to consumer goods
sector in Nigeria. Table 10, shown a better
coefficient of 0.59 of account payable ratio and
short-term payable ratio implying that, if other
variables are held constant, as account payable
ratio and short-term payable ratio increases,
return on assets increase in that magnitude. A
N1.00 increase in account payable ratio would
lead to a N0.59 decrease in return on assets.

Ekpoese et al
75
DISCUSSION OF FINDINGS
Inspired by the quest to find out if accounts
payable administration influences the
profitability of manufacturing companies with
reference to consumer goods sector in Nigeria,
accounts payable administration was stratified
into accounts payable ratio and short-term debt
ratio dimensions. In line with these
classification, three hypotheses were
developed and analyzed. Data for the variables
across ten consumer goods sector for a period
of ten years were computed and analyzed and
the result are discussed below. Hypothesis one
represents accounts payable ratio, with a
probability value of 0.954 greater than 0.05,
and a regression coefficient of -0.006
demonstrated an insignificant negative
influence on return on assets of manufacturing
companies with reference to quoted
manufacturing companies with reference
consumer goods sector in Nigeria. This implies
that accounts payable ratio has a negative
influence on profitability of quoted
manufacturing companies with reference
consumer goods sector in Nigeria. The analysis
also implies that a unit increase in accounts
payable ratio will cause about N-0.006 increase
on return on assets of the sector. This finding
is in line with [26], who showed that there is a
statistically significant negative relationship
between indicators of working capital
management and the profitability of firm over
the period of study.
Hypothesis two, denotes short term debt ratio,
with a probability value of 0.000 less than 0.05,
and a regression coefficient of 0.552
demonstrated a significant positive influence
on return on assets of quoted manufacturing
companies with reference to consumer goods
sector in Nigeria. This implies that short term
debt ratio has a positive influence on
profitability of quoted manufacturing
companies with reference consumer goods
sector in Nigeria. The analysis also implies that
a unit increase in short term debt ratio will
cause about N-0.552 increase on return on
assets of the sector. The finding was in support
of [21] who asserted a significant positive
relationship between dependent and
independent variables and was used to predict
and forecast the company's accounts payable
situation. Accounts payable was optimized by
the organization by using forecasting to create
a budget for receipts and payments.
Hypothesis three, signifies accounts payables
ratio and short-term debt ratio with a
probability value of 0.000 less than 0.05, and a
regression coefficient of 0.59 demonstrated a
significant positive influence on return on
assets of quoted manufacturing companies with
This implies that accounts payable ratio and
short-term debt ratio has a positive influence
on profitability of quoted manufacturing
companies with reference consumer goods
sector in Nigeria. The analysis also implies that
a unit increase in short term debt ratio will
cause about N-0.59 increase on return on assets
of the sector. The finding was in support
Kithinji, Wephukulu, Gekara, and Mwanzia in
2022 who asserted that financial performance
of Kenya's public universities is impacted by
the management of accounts payable turnover,
accounts payable day ratio, and coverage ratio
as metrics of accounts payable both collectively
and individually.
CONCLUSION AND RECOMMENDATIONS
Based on the study's findings, it was
determined that the short-term debt ratio has a
large influence on the profitability of quoted
manufacturing companies in Nigeria, whereas
the accounts payable ratio has a minor
influence. As a result, the maturity of short-
term debt and accounts payable should be
carefully examined. This would improve
performance and boost the company's
profitability. The researcher also recommended
the following;
i. For enabled extending of the accounts
payable time to the bare minimum, top
management should maintain solid credit
practices that may at least optimize sales both
in the short and long terms.
ii. An econometric analysis of factors connected
to accounts payable is required for each firm
since the volume of payables directly
influences the final indicators of economic
activity.
iii. Managements should design long-term debt
repayment strategies, such as suggesting a 90-
day ideal to creditors(payables), to ensure debt
repayment within the most advantageous time
frame.
iv. In order to ensure minimal supply
interruption and increase liquidity capacity,
institutions should negotiate better terms of

76
credit with their suppliers and extend the
accounts payment period to their favour.
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Accounts Payable Administration and Profitability of Quoted Manufacturing Companies in Nigeria.

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