THE RELATIONSHIP BETWEEN CREDIT MANAGEMENT AND LIQUIDITY OF MANUFACTURING COMPANY

ABSTRACT: The study examined credit management and liquidity of manufacturing company. The objectives of the study includes to examine the relationship between average collection period a firms liquidity, to examine if there is a significant relationship between average payment period and the liquidity of a firm, to find out how debt affects the liquidity of a firm and to establish if there is a significant relationship between credit policy and liquidity of a firm. A sample of fifty companies was selected and data generated from the annual financial reports. The findings obtained were that debtors collection period enhance liquidity of quoted manufacturing firms in Nigeria and was observed to be significant and positively associated with liquidity (current ratio) and creditors payment period was found to reduce liquidity in Nigeria and is negatively correlated with liquidity of quoted manufacturing firms. It is therefore suggested that the overall state of liquidity should be improved so as to have a favourable impact on the profitability of the company and also, the establishment of cash conversion period which has the potential to improve profitability.