Assets working capital investments.The purpose of this study is

Assets necessary for the working of fixed assets are inventories, cash and accounts receivables; and liabilities necessary for the working of fixed assets are accounts payables.Pandey 19 noted that excessive working capital results in unnecessary accumulation of inventories leading to inventory mishandling, wastage and theft; higher incidence of bad debts; complacency of management inefficiency; increasing speculative profit from accumulated inventories and consequent loss of profits.Inadequate working capital, he added, stagnate growth from investment capital inadequacies, increased operating inefficiencies; increased inefficiencies in the utilization of fixed assets, making operating plans implementation difficult reducing profitability.Findings from Hayajneh and Yassine 13 on Jordanian firms; Amarjit et al 1 on American firms; Samiloglu and Demirgunes 21 on Turkish firms; Vedavinayagan 24 on telecommunication firms in the United States of America; Raheman and Nasr 20 on Pakistani firms and Filbeck and Krueger 9 suggest improved corporate profitability from improved gross working capital investments.The purpose of this study is to ascertain if there exists any improvement in profitability of quoted firms in Nigeria from improved gross working capital position due to increase in liquidity for acquisition of current assets from improved access to bank finance and capital base increase of banks themselves in Nigeria.Increasing a firm’s net working capital, current assets less current liabilities, reduces the risk of a firm not being able to pay its bills on time.The existence of a firm according to Ross 25, depend on the ability of its management to manage the firm’s working capital.Working capital management involves the process of converting investment in inventories and accounts receivables into cash for the firm to use in paying its operational bills.As such, working capital management she added, is thus at the very heart of the firm’s day-to-day operating environment, and improving corporate profitability.Current assets of a firm are made up of accounts receivables, trade credit and consumer credit; inventory, raw materials, work-in progress and finished goods; cash and all receipts falling due within a year.The components of working capital a firm invests in and its level of investments is a function of firm’s operating factors.Measurement of a firm’s cash flow is by the cash conversion cycle, the net of days from the outlay of cash for raw materials, to receiving payments from customers.The profitability measure of a firm’s working capital compares the returns on capital (ROC) which results from working capital management, with the cost of capital, resulting from investment decisions.In combination of these criteria, firms’ management combines policies and techniques for managing of working capital.Inventory management identifies the level of inventory which allows for uninterrupted production while reducing investments in raw materials and minimizing re-ordering costs, and hence increasing cash flow.To forestall adverse effects of credit on firm operators, working capital efficiency require constant updating of credit performance, and developing sound criteria for credit extension.Efficiency in working management requires a firm to make use of credit terms extended to it, balancing such with favourable trade-offs for early payments from customers with discounts.This central importance of working capital to the operational efficiency has co-opted firm’s to put much emphasis on adequate planning, co-ordination and control of its working capital to reduce associated costs and increase revenues and profitability.Working capital turnover ratio focuses on working capital items only, relating sales revenue to working capital.The profit level of a firm is a measure of efficiency in the use of firm resources in operation, measured as the difference between cost of operation and sales.The lower the cost expended on operations in a firm, the higher will be the profit of the firm, a measure of operational efficiency.Meigs and Meigs 26, noted that for a firm to remain solvent and be in operation, it must determine its needed working capital at all times, compare it with that available, identify the sources of its working capital and raise the needed working capital.Shin and Soenen 23 concluded from their study of the relationship between working capital and value creation (profitability) to shareholders that there exists a strong negative relationship between the length of a firm’s net-trade cycle and profitability suggesting the reduction in a firm’s net trade cycle to reduce operational embarrassments and create value for shareholders.Furthering, Deloof 6 argued conclusively from his study of 1,009 large Belgian non-financial firms from 1992-1996 that there exists a significant negative relationship between gross operating income and the number of days accounts receivable, inventories and accounts payable; noting that increasing corporate profitability is feasible through the reduction in the number of days for accounts receivable and inventories.Increasing a firm’s net working capital, current assets less current liabilities, reduces the risk a firm not being able to pay its bills on time.The existence of a firm according to Ross 25, depend on the ability of its management to manage the firm’s working capital.Working capital management involves the process of converting investment in inventories and accounts receivables into cash for the firm to use in paying its operational bills.Inventory management identifies the level of inventory which allows for uninterrupted production while reducing investments in raw materials and minimizing reordering costs, and hence increases cash flow.To forestall adverse effects of credit on firm operators, working capital efficiency require constant updating of credit performance, and developing sound criteria for credit extension.Efficiency in working management requires a firm to make use of credit terms extended to it, balancing such with favourable trade-offs for early payments from customers with discounts.Firms reduce investments in inventories of raw materials to accumulate cash, with the risk of running out of inventories and production halt.Holding little cash will require the firm selling securities to meet up its cash, and incurring capital market trading costs.Findings by Lazaridis and Tryfonidis 16 from their study of 131 firms listed on the Athens Stock Exchange between 2001 and 2006, showed a statistically strong relationship between profitability and behavior in a working capital component: cash conversion cycle.Detailing, Hayajneh and Yassine 13 concluded that firm size, sales growth and current ratio (working capital components) affect corporate profitability from their study of 53 Jordanian manufacturing firms listed on the Amman Exchange from 2000-2006.This central importance of working capital to the operational efficiency thus require firm’s to put much emphasis on adequate planning, co-ordination and control of its working capital to reduce associated costs and increase revenues.The little working capital available to Nigerian firms is managed by them to avoid operational embarrassments.The Nigerian economy characterized by low capacity utilization of firms, infrastructural breakdown, unstable monetary policies, lack of local raw materials inputs, unstable foreign exchange market, multiple taxation, low level of disposable income and purchasing power of citizens, and high cost of finance, has negatively impacted on the working capital situation of Nigerian firms.These factors have negatively affected the working capital positions, planning, management, and the operational efficiencies of Nigerian firms, exposing them to operational embarrassments, though improvements in working capital positions of quoted firms have been recorded since increase in capital base of banks to N25billion.