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Is Capital Structure Associated with Working Capital?
Empirical Evidence from Nigeria
Etumudon Ndidi Asien
1
Federal University, Otuoke, Bayelsa State, Nigeria


ABSTRACT


This paper investigates the association between capital structure and elements of working capital, using ratios. The paper hypothesizes a significant association between capital structure and a set of elements of working capital. The research data were collected from online financial statements of 89 non-finance companies listed and trading on the Nigerian Stock Exchange in 2015. The data were analyzed using one-way multivariate analysis of variance, MANOVA. We find evidence that suggests a significant association betweencapital structure ratio and current ratio, quick ratio, cash ratio, accounts receivable days, and inventory days. Based on our findings, we recommend that managers should take a cue from the capital structure of their companies to manage elements of working capital. The implication of our finding is that managers may apply conservative working capital management strategies or policies.

Keywords: Capital structure, working capital, current ratio, quick ratio, cash ratio, accounts payable days, accounts receivable days, inventory turnover days, long-term
debts

JEL CODES: G1, G2, G14, G19, D5, M14