The effect of accounts receivable on return on assets of selected nigerian firms

Working capital management plays a significant role in better performance of manufacturing firms. Decisions relating to working capital involve managing relationship between a firm’s short-term assets and liabilities to ensure a firm is able to continue its operations, and have sufficient cash flows to satisfy both maturing short-term debts and upcoming operational expenses at minimal costs, increasing corporate profitability. This study investigates the effects of Accounts Receivable on Return on Assets of selected Nigerian firms for the period 2000-2009. Data generated was used to run both cross sectional and time series regression. The results showed that Accounts Receivable had a significant negative relationship with Return on Assets which measured profitability. This implies that decrease in debt collection from debtors often leads to increase in profitability and managers can create value for shareholders by means of decreasing receivables and inventory. Size and Growth, used as control variables, showed a positive relationship with profitability also.