Article,
Evaluating the Financial Performance of Listed Food Product Enterprises in Nigeria: The Cost of Capital Factor
ENTRAL ASIAN JOURNAL OF INNOVATIONS ON TOURISM MANAGEMENT AND FINANCE, 4 (9): 31-45 (September 2023)
Abstract
The study evaluated cost of capital as a factor that determines the financial performance of listed food product enterprises in Nigeria. Specifically, return on asset was expressed as a linear function of cost of equity, cost of long-term debt and cost of total debt. This research implemented an Ex-post Facto research design on the entire population of eleven (11) listed food products firms in Nigeria. The sample size of the study made up of five firms was determined using purposive sampling. Secondary data were collected from the 10 year annual reports of the sampled firms from 2013 to 2022. Inferential statistical analysis was performed using the Least Square regression technique to test the study's hypotheses. The findings revealed the following: cost of equity has a significant positive effect on the return on assets of listed food products firms in Nigeria (β = 0.107943; p-value = 0.000); cost of long-term debt has a non-significant negative effect on the return on assets of listed food products firms in Nigeria (β = -0.023864; p-value = 0.6241); cost of total debt has a non-significant negative effect on the return on assets of listed food products firms in Nigeria (β = -0.157929; p-value = 0.6435). The study concluded that managing debt levels judiciously is essential to mitigate the risks associated with higher debt costs since excessive debt can strain a firm's cash flow and profitability, leading to financial instability and potential default risks. We recommend that managers should meticulously attract equity investment through enhanced investor relations, transparency in financial reporting, and efforts to improve the company's investor appeal and so enhance firm performance.
