Navigating the Financial Landscape: Unravelling the Interplay between Current Liabilities and Profitability in Nigerian Consumer Goods Sector

The study evaluated the effect of current liabilities on profitability of consumer goods firms in Nigeria. The specific objectives of the study were to assess the effects of accounts payable, income tax payable and dividend payable on profit for the year of firms in the consumer goods industry in Nigeria. Data were collected from annual reports and accounts of sampled firms within the industry to test the major null hypothesis that selected current liabilities do not affect profit for the year significantly. Multiple regression was the tool of analysis using panel data set covering 30 observations from three firms in the consumer goods industry. The findings revealed that Accounts Payable (AP) has a negative (Coefficient -0.106881) but significant effect (p-value 0.0004) on Profit for the Year (PFY), Income Tax (IT) has a positive (Coefficient 2.103591) and significant effect (p-value 0.0000) on Profit for the Year, while Dividend payable (DP) has negative (Coefficient -0.302978) and non-significant (p-value 0.2772) effect on Profit for the Year in consumer goods firms in Nigeria. The implication of the findings is that the effect of current liabilities on profit for the year in the industry depends on factors of environment, credit policies, nature of products, distribution channels and corporate governance mechanisms. The study concluded that trade creditors and dividend payables should be reduced while income tax be allowed to flow in tandem with the accounting profit for the year. The study recommended that firms should reduce the list and amount of trade creditors, government should judiciously invest tax revenues in infrastructural development and firms’ growth should be pursued through retained earnings.