Inventory Management: An Impetus for Increased Profitability in Manufacturing Firms

Kolawole, Adebola Daniel and Akomolafe, Adesola Busola and Olusipe, Babatunde Johnson (2019) Inventory Management: An Impetus for Increased Profitability in Manufacturing Firms. International Journal of Accounting, Finance and Risk Management, 4 (4). pp. 1-6. ISSN Print: 2578-9368, Online: 2578-9376

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Abstract

This study evaluated the degree of relationship between inventory management and profitability of manufacturing firmsin Nigeria. International Breweries Plc was adopted as case study. Secondary data were sourced from the company’s annual reports for the period of 10 years. A simple linear regression model was specified to test the correlation between variables used. Stock turnover ratio was used to capture the relationship between costs of sales incurred in generating total revenue and the inventory utilized in for production and distribution. The result generated from the study showed that the company operates an efficient Inventory Management System which has strong influence on its profitability. The correlation coefficient (r) was 85.3% while r2 was 72.7%. The study concluded that the efficient inventory management contributed significantly to profitability of manufacturing companies. The study recommended that manufacturing firms should focus on improving on their inventory management system by adopting a more efficient approach in utilizing inventory items.

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