MODERATING EFFECT OF CURRENT RATIO IN THE RELATIONSHIP BETWEEN INVENTORY TURNOVER, CASH CONVERSION CYCLE AND FINANCIAL PERFORMANCE OF LISTED FOOD AND BEVERAGE FIRMS IN NIGERIA

Abstract

The primary objective of this ex-post facto research is to investigate the relationships among inventory turnover, cash conversion cycle, current ratio, and the financial performance of food and beverage companies listed on the Nigerian Exchange Group.  Employing an ex-post facto research design, the study focuses on a population of 19 food and beverage companies listed on the Nigerian Exchange Group during the study period. Census sampling was used to select the entire population due to its manageable size. Secondary data from financial statements of these companies were collected and analyzed using descriptive statistics, correlation analysis, unit root tests for preliminary analysis, and panel regression for hypothesis testing. The choice of secondary data was driven by the quantitative nature of the variables, allowing for a comprehensive examination of the cause-and-effect relationships. The panel regression findings indicate a significant negative impact of inventory turnover on the financial performance of listed Food and Beverage firms in Nigeria. However, the cash conversion cycle shows a negative effect on financial performance that is not statistically significant. On the other hand, the current ratio has a significant moderating effect, positively influencing the relationship between inventory turnover and financial performance. Conversely, the current ratio does not exhibit a significant moderating effect on the relationship between the cash conversion cycle and financial performance for these firms. In conclusion, the study contributes to understanding the financial dynamics of the food and beverage industry in Nigeria. The findings underscore the importance of optimizing inventory management and prioritizing liquidity to enhance overall financial performance. Based on the study's findings, recommendations include implementing efficient inventory control mechanisms, maintaining optimal liquidity levels, enhancing financial reporting systems, and continuous improvement in the cash conversion cycle for sustained financial efficiency and resilience in the industry.

Keywords: credit appraisal policy, credit collection policy, credit risk control policy, credit terms, debt recovery policy, financial performance