EFFECT OF AN EFFICIENT INVENTORY MANAGEMENT ON THE PROFITABILITY OF A FIRM

EFFECT OF AN EFFICIENT INVENTORY MANAGEMENT ON THE PROFITABILITY OF A FIRM

ABSTRACT

In this project work titled effect of inventory management on the profitability of a firm with particular reference to Nigerian Breweries Plc. The researcher examined the effect of inventories on the net profit after tax of Nigerian Breweries Plc. The extent at which inventories influences the return on asset of Nigerian Breweries Plc. The effect inventories on retained earnings of Nigerian Breweries plc. Data for the study was sourced through the bank’s Annual report and journal articles related to the subjects matter. The data collected was analyzed using SPSS. The results of the study shows that calculated t-statistics (t = -0.675) for inventory is greater than tabulated t-statistics at 0.05 level of significance. The regression equation also revealed that Net profit after tax accounted for -0,422 unit for every decrease in inventory. The coefficient of determination (R2) 0.568 indicating that 57% of variation in inventory decrease is caused by variation Net profit after tax. The relationship between inventory and Net profit after tax is high, positive and statistically significant at 0.05 level (r=0.754, p<0.05). The overall regression model is statistically significant in terms of its overall goodness of fit (f = 0.439, p < 0.05). As a result of this the study accepts the alternative hypothesis meaning that inventories has significant effect on the net profit after tax of Nigerian Breweries Plc. It was also observed that inventories influences return on asset of Nigerian Breweries Plc to a large extent. The researcher also discovered that inventories has significant effect on retained earnings of Nigerian Breweries plc. Based on the findings the researcher recommends that ii. The company should employ the economic order quantity method when placing orders. The economic order quantity model puts into account the relevant costs associated with ordering and carrying inventory. Every business organization aims at reducing cost to the barest minimum and one of the avenues by which this could be achieved is adopting the economic order quantity method of placing order. Sufficient stock should be held in order to avoid stock-out so that when the ordering level is high; there will be enough stock to be delivered.

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