Does Average Collection Period affect Profitability of Manufacturing and Allied companies listed on NSE?

Abstract

The study sought to evaluate the effect of average Collection Period on Profitability of manufacturing and Allied companies listed on NSE. An explanatory research design was used. The area of interest was all the nine firms listed in NSE. The study utilized secondary data, which was acquired from manufacturing and allied firms’ annual reports for the last ten years between 2009 and 2018. The data was then analyzed by employing descriptive as well inferential statistics with the support of Statistical software SPSS for statistical analysis. Additionally, descriptive statistics mainly focused on computation of mean, percentage, standard deviation as well as frequencies. Inferential statistics composed of correlation as well as multivariate regression parameters and coefficients. The study found that ACP has an inverse and significant influence on profitability (ROA) of manufacturing and allied firms cited in NSE (β1=-2375624; p-value=0.000). The study therefore recommends that manufacturing and allied firms should minimize the period of time that their customers take to pay for goods sold to them. This can be achieved through increasing the efficiency of industrial operations. The management of firms should establish ways of increasing ACP so as to improve their firms’ profitability