Financial Control Systems and Financial Systems Theory: Free Cash Flow and Profitability Nexus: a Comparative Study of Manufacturing Firms in Nigeria and Ghana

Abstract

In Financial Systems, the impact of Free Cash Flow (FCF) on the performance of a company has been in the center of academic discourse in recent years. Several studies have tried to ascertain the nature and magnitude of the relationship between free cash flow and firm profitability with conflicting results coming from different scholars. The main objective of this research work was to examine the impact of FCF on the profitability of quoted manufacturing firms in the Nigerian and Ghana stock exchanges. Data were pooled from twenty (20) different companies (ten each from Nigeria and Ghana) for a period of six years (2012 – 2017). A panel data estimation model was used to measure the impact of FCF and other performance metrics on the Return on Assets (ROA), which is our chosen profitability measure. The results show a positive but insignificant relationship between FCF and ROA both for Ghana and Nigerian manufacturing firms. Also, sales growth showed a positive impact on profitability of both countries while leverage negatively impacted on profitability. with Ghana being significant at 5%. The implication of the findings of the study is that it makes no business sense for companies to keep piling up excess funds beyond that which is needed for transactional purposes. The similarity between the results from Ghana and Nigeria in most of the variables shows that the findings of this study can be generalized to other countries. Based on the findings of the study, we recommend that the management of companies should strive to keep only the minimum needed free cash flow while the rest should be invested in other projects with positive net present value

Pengaruh Narsisme Ceo Dan Arus Kas Bebas Terhadap Kinerja Perusahaan

“…Menurut Jensen, kelebihan kas yang diperlukan di perusahaan untuk berinvestasi di semua proyek NPV positif yang disebut free cash flow (FCF). Hermenson Edward dan Salmonson mengatakan bahwa profitabilitas merupakan hubungan pendapatan dengan beberapa ukuran laporan posisi keuangan yang menunjukkan kemampuan guna mendapatkan pendapatan dari aset yang digunakan (Nwuba, et al, 2020).…”

“…Salah satu implikasi dari teori agensi adalah bahwa perusahaan dengan arus kas bebas cenderung tumbuh melampaui titik optimal maksimalisasi kekayaan pemegang saham. Setiap keputusan manajemen yang menghentikan pengeluaran berlebihan seperti itu akan menguntungkan pemegang saham perusahaan tersebut (Nwuba, et al, 2020).…”

“…Hasil penelitian ini sejalan dengan hasil penelitian milik (Falah & Mita, 2020;Meilani et al, 2021;Rani, 2021) yang menyatakan bahwa narsisme CEO Narsisme CEO tidak memiliki pengaruh terhadap kinerja perusahaan. Penelitian ini bertentangan dengan penelitian milik (Khushi et al, 2020;Nwuba et al, 2020;Zhang et al, 2021) dan (Uppal, 2020) yang menyatakan bahwa narsisme CEO berpengaruh terhadap kinerja perusahaan.…”

Markov Chain and Inventory Management of Manufacturing Companies in Nigeria

“…The ultimate goal is to select a course of action that optimizes actions based on rules that will move the desired goal effective choice and these decisions will translate to corporate policies aimed at enhancing adequate inventory management efficiency and in turn ensuring financial performance and profit maximization. Nwuba et al, (2020) carried out research using the Markov chain stochastic inventory management for a single product with irregular demands to establish the optimal order level at the same time as the reorder level during long-term customers' demands. The Markov chain model employed (X, r) inventory policy that allows two different order sizes (X1, X2) and two different reorder levels (r1, r2).…”

“…In addition, Nwuba, Omankhanlen, Chimezie and Okoye (2020), posited that inventory management is the strategic process of monitoring and controlling inventory aimed at adequate replenishment as and when due, towards meeting customers' demands at all times. The ability to determine the appropriate and right inventory level in the manufacturing companies is significant to the successful performance of the organization (Amah, 2016).…”