Inventory turnover ratio and firm profitability: A study of listed agricultural firms in Nigeria

Abstract

A manufacturing company's turnover rate affects the revenue, which in turn affects the firm's profitability. Effective inventory management has a fundamental role as a determinant of profitability. This study examines the influence of inventory turnover on the profitability of firms within the agricultural sector in Nigeria. The study examined the listed agricultural firms in the Nigerian exchange group for 24 quarters for analysis for 2018 to 2023 using secondary data from the financial statements of these examined firms. Ordinary least squares employed a regression method of data analysis. The results of the study revealed that inventory turnover ratios have an insignificant influence on profitability as represented by return on assets (ROA). The findings show that the considerable impact of inventory turnover on return on equity (ROE) is negative and positive on return on sales (ROS). The study recommends that more efforts be put into improving inventory management efficiency in agricultural firms. However, there should be significant consideration and monitoring of outcomes on ROE to see if the cost of improving inventory management outweighs the benefit because of its negative impact on ROE.