June 2025 Edition

THE EFFECTS OF TRADE RECEIVABLES AND PAYABLES MANAGEMENT ON THE LIQUIDITY OF AGRO ALLIED FIRMS IN OYO STATE, NIGERIA

ADEDIPE Oluwaseyi Ayodele Ph.D, ADELEKE Adebowale Babawale

Abstract

This study examined the effect of trade receivables and payables management on the solvency of agro allied firms in Oyo State. The aims were to: examine the effects of trade receivables and payables management on the liquidity of agro allied firms; and analyse the influence of trade receivables and payables management on the profitability of agro allied firms in Oyo State. The study utilized survey research design. Primary data were used and instrument used for primary data collection was questionnaire. Accidental sampling method was employed to select 50 agro-allied firms using their account personnel as the respondents of the study. Inferential statistics Ordinary Least Square Regression were used to test the relationship between independent (receivables and payables management) and dependent (agro-allied firms' solvency) variables. Pearson Product Moment Correlation was adopted to analyse the relationship between receivables and payables management and solvency of agro-allied firms. The findings further showed that trade receivables and payables management had significant effects on solvency of agro allied firms in Oyo State; and significant relationship existed between them (F-cal. = 98.76 greater than F-tab. = 2.641 and r = 0.7629 greater than 0.5 at 0.05 level of significant). The study also revealed significant effects of receivables and payables management on liquidity of agro-allied firms in Oyo State; and significant relationship existed between them (F-cal. = 70.16 greater than F-tab. = 2.641 and r = 0.7466 greater than 0.5 at 0.05 level of significant). The finding further revealed that management of receivables and payables had significant effects on profitability of agro allied firms in Oyo State; and significant relationship existed between them (F-cal. = 103.8 greater than F-tab. = 2.641 and r = 0.77.61 greater than 0.5 at 0.05 level of significant). The study concluded that trade receivables and payables management had positive and significant effects on the solvency of agro allied firms in Oyo State. Proper trade receivables and payables management stabilised liquidity and enhanced profitability of agro-allied firms and enable the firms to offset their long term obligations and enjoy continuity. The study recommends that agro-allied firms should reduce payables and increase receivables by shorten the maturities of revenue invoices and increase the maturities of cost invoices.

Keywords

Receivables; Payables; Liquidity-Profitability; Agro allied; Trade off Theory

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