THE IMPACT OF FINANCE COST ON PRICE EARNINGS RATIO AND EARNINGS PER SHARE OF LISTED OIL AND GAS COMPANIES IN NIGERIA

Abstract

Price earnings and EPS are fundamental to the success of any business entity and finance cost is incurred in order to improve the wellbeing of the company and the stakeholders. Therefore, the study attempted to assess if finance cost significantly impacts on earnings of “listed oil and gas companies” in Nigeria. The study anchoring on the positivist paradigm, selected the ex post facto method of research design. The study randomly selected four of the listed companies as the ones to be investigated.   Their annual financial statements were the source of the secondary data collected for the study. Applying the Pearson correlation model as the tool of analysis on the data gathered, the investigation showed finance cost does not significantly impact on price earnings ratio, a negative correlation and a very weak correlation with a significant value of 0.912 and a correlation of -0.018. The investigation further showed finance cost does not significantly impacts EPS with a significant value of 0.614 and also with correlation value of 0.082, the correlation is positive but very weak. The recommendations made by the study are that the management should ensure adequate finance cost that will enhance earnings in order to boost companies P/E ratio and that borrowed funds should be channeled to areas that will boost profits in order to enhance EPS which is a key performance indicator. The study concluded that finance cost does not significantly impact on price earnings ratio and earnings per share of “listed oil and gas firms” in Nigeria.