EFFECT OF ASSETS AND LIABILITIES ON OPERATING PERFORMANCES OF LISTED BREWERIES COMPANIES IN NIGERIA
ABSTRACT
This study focuses on the
Effect of assets and
liabilities on operating
performances of listed
breweries companies in
Nigeria. A proper research
was carried out to ascertain the impact of assets or liabilities on the financial performance of listed brewery
companies in Nigeria, to evaluate the effect of credit turnover ratio (CTR) on operating performances of listed
breweries companies in Nigeria, to assess the influence of Inventory turnover ratio (ITR) on operating performances
of listed breweries companies in Nigeria, to examine the impact of cash ration (CR) on operating performances of
listed breweries companies in Nigeria, and to investigate the effect of Fixed assets turnover ratio (FATR) on operating
performances of listed breweries companies in Nigeria.
The source of data collection used for this study is secondary data. The preliminary stage of this study was
essentially collection of data from relevant literature that is from Journals, Publican, Library, internet and annual report
of Nigerian and Guinness Breweries Company. In addition, Ten year’s financial report account would be immensely used. One of the conclusions derived from the study of previous research is that that asset and liabilities affect
performance of the Nigerian breweries and Guinness breweries Company.
INTRODUCTION
Apart from the telecommunications industry and oil and gas sector, the brewing industry has been the largest source
of Foreign Direct Investment (FDI) in the country. Such investment includes Heineken’s investment in Nigeria
Breweries Plc. which is its largest investment outside Europe. It also became a major stakeholder in consolidated
breweries Plc. with 50.2% (Omolara, 2006). The Nigerian brewery market is currently a 15mhl market and typifies a
classic illustration of a duopoly (Ahmed, 2010). Though there are handful marginal players, the market is dominantly
driven by Nigerian Breweries Plc. and Guinness Nigeria Plc. with a combined market share of 80%. From a holistic
view, this concentration level is much more pronounced when we consider the underlying ownership of the 2 brewers:
NB Plc. is majority-owned by Heineken, and Guinness Nigeria Plc. is majority owned by the Diageo Group.
The world brewery market has over the last 5-10 years become increasingly concentrated with a wave of business
combinations among brewery giants as well as diversification of investments outside their geographical location. All
these are in the quest to dominate the market as well as the maximization of shareholders wealth. Increasing market
domination that will enhance the maximization of shareholders wealth depends largely on certain firm specific factors
such as persistent profitability. Profit maximization for any firm depends on efficient management of cost and process
of production as well as increases in sales resulting from firm’s market domination. One factor that is deduced to
influence firm profitability grossly is the firm’s working capital.
In manufacturing firms, current assets account for more than half of its total assets. Excessive levels of current assets
can easily result in a firm realizing a substandard return on investment, however, when the level of current assets is
low the firm may incur shortages and its operations will be affected, Horne and Wachowiz (2005). The firm is
responsible to pay off its current liabilities as and when they fall due. Efficient working capital management controls
current assets and liabilities in a manner that eliminates the risk of inability to meet the short term obligations and
avoid excessive investment in current assets.
This management of short-term assets is as important as the management of long-term financial assets, since it
directly contributes to the maximization of a business’s profitability, liquidity and total performance. Consequently,
businesses can minimize risk and improve the overall performance by understanding the role and drivers of working
capital (Lamberson, 2006). It is important that a firm preserves its liquidity to enable it meet its short term obligations
when due. Increasing profits at the cost of liquidity exposes a company to serious problems like insolvency and
bankruptcy. While on the other hand, too much working capital results in wasting cash and ultimately the decrease in
profitability (Chakraborty, 2008). Liquidity is thus also very important for a company. A tradeoff between these two
objectives of the firms should be obtained so as to ensure that one objective is not met at cost of the other yet both
are equally important. If a firm does not care about profit, it cannot survive for a longer period. On the other hand, if it
does not care about liquidity, it faces the problem of insolvency or bankruptcy. For these reasons working capital
management should be given proper consideration for this will ultimately affect the profitability of the firm.
This management of short-term assets is as important as the management of long-term financial assets, since it
directly contributes to the maximization of a business’s profitability, liquidity and
Business organizations are viewed as an essential element of a healthy and vibrant economy. They contribute
significantly to the economic growth and sustainable development through employment generation and poverty
alleviation globally. In Nigeria, manufacturing companies have been witnessing distressed syndrome due to poor
management of working capital. In line with this view, Studies reveal that many business organizations have
moribund, some have left the country to other Africa countries for their survival, while surviving ones in the country
are still thinking of mergers and acquisitions due to liquidity problem syndrome (Salawu & Alao, 2014; Lawal, Abiola &
Oyewole, 2015)
EFFECT OF ASSETS AND LIABILITIES ON OPERATING PERFORMANCES OF LISTED BREWERIES COMPANIES IN NIGERIA