Effect of Cashflow on the Networth of construction firms in Nigeria
DOI:
https://doi.org/10.14738/abr.910.10227Keywords:
Cashflow, Networth, Construction Firms, NigeriaAbstract
The main objective of this study is to ascertain the effect of Cashflow on the Networth of construction firms in Nigeria. The specific objectives are to: determine the relevance of operating activities to Networth of construction firms in Nigeria; ascertain the relevance of investing activities to Networth of construction firms in Nigeria; and to verify the relevance of financing activities to Networth of construction firms in Nigeria. The study adopted the ex-post facto research design and the data for analysis were obtained from the annual reports and financial statements of accounts of two (2) sampled firms from the construction industry in Nigeria, namely Julius Berger Nig. Plc and MISTA Nig. Ltd. The data collected covered 10 years (2009-2018) for Julius Berger and MIXTA Nig. Ltd and were then pooled and analysed using SPSS v 20.0, the tools of analysis being correlation coefficient (r), coefficient of determination (R2), F-ratio (ANOVA), t-test (for the tests of hypotheses), and the regression analysis for fitting the models. Findings revealed that operating activities cost, investing activities costs and financing activities cost have no significant relevance to Networth of construction firms in Nigeria. The conclusion was that the construction industry in Nigeria, though bereft of adequate amount of data to accomplish the aim of this study, has at least opened a new dimension about this contemporary issue in research. That would be a welcome dimension in our effort to improve the Building and Construction sector for development. Based on the findings, the study recommends that Managers should adopt cost reduction practices that would increase efficiency of operations that could translate to higher Networth; more investment activities should be encouraged by Construction firms so as to consolidate on the present situation; and the managements of Construction firms are advised to increase the financing activities in the industry so as to improve total assets. This will grow more assets and reduce the size of liability of the firms in the future. The implication is that since all the three components do not have significant effect on the Networth of construction companies in Nigeria, it might be difficult to generalize the findings. Therefore, it might need further investigation using larger sample size and different analytical approaches to ascertain the effect of Cashflow on Networth of Building and Construction firms in Nigeria.
References
Ab Halim, M. S., Haniff, S. M., Junoh, M. Z. M., & Osman, A. (2014). Financial performance and the management issues of Bumiputera construction firms in the Malaysian Construction Industry, Journal of Scientific Research & Reports, 3(9), 1190-1202
Abdulrazaq, M. (2015). Developing models for predicting the impact of risk factors on construction contractors’ cash flow forecasts in Nigeria, a thesis submitted to the school of postgraduate studies, Ahmadu Bello University in partial fulfilment for the award of Doctor of Philosophy in quantity surveying.
Ahadzie, D. K, Proverbs, D. G., & Olomolaiye, P. O. (2008). Critical success criteria for mass house building projects in developing countries, International Journal of Project Management (26), 675–687, available at https://doi.org/10.1016/j.ijproman.2007.09.006
Ahmadu, H. A., Ibrahim, Y. M., Ibrahim A. D., & Abdullahi, M. (2015). Modeling building construction durations, Journal of Financial Management of Property and Construction, 20 Issue: 1, pp.65-84. http://dx.doi.org/10.1108/JFMPC-02-2014-0004
Akinsulire, A. (2008). Effects of delay on construction project delivery, being a Project Report submitted to the Department of Building, University of Lagos in partial fulfillment of the requirements for the award of Master of Science (M.Sc) Degree in Construction Management, retrieved on October 17, 2019.
Akomah, B.B., & Jackson E.N. (2016), Factors affecting the performance of contractors on building construction projects: Central Region, Ghana, International Journal of Innovative Research and Development, 5(10), 151-158.
Bragg, S. (2019). What are operating activities? Available at https://www.accountingtools.com/articles/whatare-operating-activities.html, accessed on October 12, 2019
Corporate Finance Institute (n.d.). What is Cashflow? Available at https://corporatefinanceinstitute.com/resources/knowledge/finance/cash-flow/, accessed on October 12, 2019.
Crush The CPA Exam (n.d.). What are investing activities? Available at https://crushthecpaexam.com/accounting-glossary/what-are-investing-activities/, accessed on October 13,
El-Sawalhi, N. I., & El-Riyati, A. (2015). An overhead costs assessment for construction projects at Gaza Strip, American Journal of Civil Engineering. 3 (4), 95-101, available at http://dx.doi.org/10.11648/j.ajce.20150304.11
Enshassi, A., Mohamed, S., & Abushaban, S. (2009). Factors affecting the performance of construction projects in the Gaza Strip, Journal of Civil Engineering and Management, 15(3), 269–280.
Fodio, M. I., Onah, R. I., & Oba, V. C. (2013). Impact of cash flow on investment levels in quoted Nigerian manufacturing firms, Research Journal of Finance and Accounting, 4(12), 65-71
Galogah, A. S., Pouraghajan, B., & Makrani, K. F. (2013). The investigation of relationship between free cash flow and stock return: Evidence from Tehran Stock Exchange. World Science Journal, 1(12), 62-69
Gambo, N., & Said, I. (2014). An assessment of the impacts of cost factors influencing performance of small scale local government contractors in Nigeria, International Journal of Engineering Research and Technology, 3(11),
Ganti, A. (2019). What is Networth? Available at https://www.investopedia.com/terms/n/networth.asp,accessed on October 12, 2019
Ghanbari, M., Haidari, F., Nazarzadeh, S., & Abasi, B. (2015) The Relationship between Cash Flow and Financial Performance of Accepted Companies in the Tehran Stock Exchange, MAGNT Research Report, 3(2), 1829-1841
Gheshlaghi, F. D. R., Ahmadzadeh, Y., & Faal, F. (2014). The cash flow statement’s component effect on management performance in firms enlisted in Tehran Stock Exchange. UCT, Journal of Management and Accounting Studies, 2 (1), 14-21.
Gocardless Ltd (2017). Net cash flow formula: Definition and how to find it. Available at th https://gocardless.com/en-us/guides/posts/how-to-calculate-net-cash-flow/, accessed on 20 December, 2020
Hayes, A. (2019). Operating activities, available at https://www.investopedia.com/terms/o/operatingactivities.asp, accessed on October 12, 2019.
Heydari, I., Mirzaeifar, M., & Javadghayedi, M. (2010). Investigating the relationship between free cash flow and the firm performance: Evidence from Tehran Stock Exchange, Indian Journal of Science and Research, 4(6), 269 –
Ilori, O. J., Oyedoyin, O. G., & Ojo, B. A. (2018). Evaluating sources of cash flow and its implications on construction projects, Journal of Scientific and Engineering Research, 2018, 5(10):231-240.
Jeff, R. (2019). How to calculate your true Networth, available at https://www.goodfinancialcents.com/what-isnet-worth/, accessed on October 12, 2019.
Kenley, R. (2003). Financing construction: Cash flows and cash farming, Melbourne, Victoria: Spon Press.
Kenton, W. (2019). What is Cashflow? Available at https://www.investopedia.com/terms/c/cashflow.asp,accessed on October 12, 2019
Liman, M., & Mohammed, A. S. (2018). Operating cash flow and corporate financial performance of listed conglomerate companies in Nigeria, IOSR Journal of Humanities and Social Science, 23(2), 1-11
Mohammadi, M., Kardan, B., & Salehi, M. (2018). The relationship between cash holdings, investment opportunities and financial constraint with audit fees, Asian Journal of Accounting Research, retrieved from https://www.emerald.com/insight/content/doi/10.1108/AJAR-07-2018-0016/full/html, accessed on October 15, 2019.
Murphy, C.B. (2019). Cash flow from financing activities – CFF, available at https://www.investopedia.com/terms/c/cashflowfromfinancing.asp, retrieved on October 13, 2019.
Murphy, C,B, (2019). Understanding the Cash Flow Statement, Available at https://www.investopedia.com/investing/what-is-a-cash-flow-statement/, accessed on 20th December, 2020
Murray, J. (2019). Cash flow – How it works to keep your business afloat, The balance Small Business, retrieved from https://www.thebalancesmb.com/cash-flow-how-it-works-to-keep-your-business-afloat-398180 accessed October 10, 2019.
My Accounting Course (2019). What are investing activities? Available at https://www.myaccountingcourse.com/accounting-dictionary/investing-activities, accessed on October 13,
Nakhaei, M., & Fafari, S.M. (2015). Survey of the relationship between capital structure and free cash flow with financial performance of companies listed in Tehran Stock Exchange, Indian Journal of Science and Technology, 8(27),
Nwanyanwu, L.A. (2015). Cash flow and organizational performance in Nigeria: Hospitality and print media industries perspectives. European Journal of Business, Economics and Accountancy, 3 (3), 66-72.
Oladimeji, O., & Aina, T. (2018). Financial performance of locally-owned construction firms in South-Western Nigeria, Journal of Financial Management of property and construction, 23(1), 1-29.
Olusegun, A.E., & Michael, A.O. (2011). Abandonment of construction projects in Nigeria: Causes and effects, Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 2(2), 142-145
Tariverdi, Y., Amanolahi, G. F., & Faal, F. (2014). The effect of components of a 4 part model of cash flow statement on operational performance of firms enlisted in the Tehran Stock Exchange. Indian Journal of Science Research, (1), 240 –250
Trading Economics (2019), Nigeria GDP from Construction, retrieved from https//tradingeconomics.com, retrieved on October 11, 2019.
Rahman, A., & Sharma, R. B. (2020). Cash flows and financial performance in the industrial sector of Saudi Arabia: With special reference to Insurance and Manufacturing Sectors, Investment Management and Financial Innovations, 17(4), 76-84. doi:10.21511/imfi.17 (4).2020.07
Ugwu, O. O., & Attah, I. C. (2016). An appraisal of construction management practice in Nigeria, Nigerian Journal of Technology (NIJOTECH), 35(4), 754-760
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Godwin Oghenekohwo Akparhuere, Callistus Emeka EMEJULU, Chike Earnest Nwoha
This work is licensed under a Creative Commons Attribution 4.0 International License.
