The Effect of Credit Policy on the Profitability and Liquidity of Manufacturing Companies (a Case Study of Dangote Group, Kaduna)

This study is aimed at determining whether cash discount in an organization’s credit policy can reduce bad debts, also to determine whether an organization’s collection period affects its liquidity and its profitability. The study adopted a survey design method of conducting research. Therefore, the data for the study were generated from both primary and secondary sources; the instrument of primary data includes questionnaire and interview, while secondary source utilizes both published and unpublished text materials. The entire population chosen was 100 while the Sample Size according to Krejcie and Morgan table 2is 80 which is of the entire population of the study. Thus, believed to be adequate representation of the overall population. The 5 Likert scale rating and arithmetic mean. After analyzing the data from various sources, it was discovered that there is no particular recommended credit policy for organizations credit policy should therefore be established considering factors as the nature of the organization’s business, its share of the market, its immediate external environment and the level of competition, also companies should minimize the allowance of cash discounts to customers as much as possible and should strive to take advantage of cash discounts from suppliers, even if it requires borrowing, provided the interest rate on borrowing is lower than the total cash discount rate for a year. And the management should ensure monitoring review and of credit policy can reduce the issue of having to deal with the dilemma involved in choosing between profitability and liquidity because new trends relating to customer behaviour and competition would be discovered which would help make effective adjustments to the credit policy.