EFFECT OF FIRM SOLVENCY ON FINANCIAL PERFORMANCE OF NESTLE NIGERIA PLC

ABSTRACT This work studied how solvency patterns shaped Nestlé Nigeria PLC’s financial performance. The key aim stayed on tracking how selected solvency figures touched profitability. Specifically, it looked at how the debt-to-asset ratio, debt-to-equity ratio, interest coverage ratio, and times interest earned ratio each related to return on assets. Twelve years of yearly data were extracted, stretching from 2012 to 2023. The dependent point was return on assets (ROA), while the four solvency ratios were kept as independents. The study ran with an ex post facto strategy and fed on secondary numbers from Nestlé Nigeria’s annual reports. Analysis came through Ordinary Least Squares (OLS) regression, layered with logarithmic tweaks for some variables. Results showed the debt-to-equity ratio pushed ROA up in a significant way, standing against popular leverage-thinking in finance. Interest coverage ratio also had a firm positive link with ROA, highlighting the weight of debt service strength. The other two ratios, debt-to-asset and times interest earned, carried no serious impact on ROA. Conclusion sat on the line that firm solvency shapes Nestlé Nigeria’s financial outcomes, but not suggested by traditional financial theory. It suggested the firm should hold sharp leverage routines, raise debt payment capacity, widen funding options, and tighten currency risk control for better performance.