EFFECT OF FINANCIAL RATIOS ON SHAREHOLDERS WEALTH OF SELECTED MANUFACTURING FIRMS IN NIGERIA

Abstract The study appraised the effect of financial ratios on shareholders wealth of selected manufacturing firms in Nigeria. The objectives formulated to guide the study were: investigate the effect of current ratio on total equity of selected manufacturing firms in Nigeria; examine the effect of debt equity ratio on total equity of selected manufacturing firms in Nigeria; ascertain how return on assets affects total equity of selected manufacturing firms in Nigeria and determine the extent to which assets turnover affects total equity of selected manufacturing firms in Nigeria. Quantitative design was adopted to achieve the objectives of the study while the scope covered five (5) selected manufacturing firms in Nigeria being Cadbury Nigeria Plc, Champion Breweries Plc, Dangote Flour Mill Plc, Dangote Sugar Plc, Fidson Nigeria Plc. Random effect panel regression model was used as the analylitical technique. It was discovered that current ratio and debt equity ratio does not have significant effect on total equity of selected manufacturing firms in Nigeria while return on assets turnover have significant effect on total equity of selected manufacturing firms in Nigeria. The study therefore recommended that the companies under study should either delay any capital purchases that would require any cash payments or sell any capital assets that are not generating a return to the business and using the cash to reduce current debt. They should improve on their debt to equity ratio by increasing sales or reducing cost in other to increase profitability. The companies under study should increase revenue without increasing assets cost through improved customer’s service, delivery or by exploring new market segment and also computerize inventery and other systems in other improve sales further due to fact that higher the asset turnover ratio, the more efficient a company is at generating revenue from it’s asset.