IMPACT OF CASH MANAGEMENT ON PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Cash management is an important component of any organization and can be concluded to be a critical success factor of a commercial bank. The major or key performance of an organization is net profit and this study seeks to establish the relationship and significance of cash management on profitability of quoted deposit money banks in Nigeria. The study employed the Returns on Asset as the proxy for profitability, the dependent variables while, the gearing ratio, non-performance loan and investment were employed as the independent variables for 10 selected banks while the study period spanned from 2013 to 2017. The data used in this study were all obtained from the annual financial reports of the sampled banks. The main objectives of this study is to examine the effect of gearing ratio on return on asset in deposit money bank; the effect of non-performing loan on returns on asset and to determine the effect of investment on return on asset in deposit money bank in Nigeria. The data collected as subjected to descriptive and inferential statistics. Descriptive statistics includes mean and standard deviation while correlation and multiple regression analyses were employed for testing hypothesis. The correlation result revealed that return on asset and gearing ratio are negatively correlated and concludes a weak relationship between gearing ratio and returns on asset. The ARDL model was also used to estimate the relationship between the variables and it is revealed that in the short run, the gearing ratio and non-performance loan positively affects return on asset. The study however conclusively recommends that debt/equity ratio of the commercial banks should be efficiently managed to maintain its short run relationship with returns on asset and efficient accounts processing arrangements for receipts and payments to reduce transaction costs to ensure efficient debtor management and collection of receivables.