DEBT FINANCING AND NET PROFIT MARGIN OF QUOTED CONSUMER GOODS MANUFACTURING FIRMS IN NIGERIA

Abstract

This study analyzed the effects of debt financing on net profit margin of quoted consumer goods manufacturing firms in Nigeria. The study proxied long-term debt ratio, short-term debt ratio and total-debt ratio by long-term debt ratio, short-term debt ratio and total-debt ratio for debt financing while profitability was proxied by net profit margin. The study was anchored on Miller and Modigliani Theory, Pecking Order Theory and the Trade-Off Theory. The study adopted both deductive and inductive methods while ex-post facto research design was used. The population of this study consisted of all the twenty consumer goods manufacturing firms quoted on the Nigerian Exchange Group as at December 31st, 2022. The study adopted convenience sampling techniques while the sample size consisted of ten (10) consumer goods manufacturing firms in Nigeria. Panel data were sourced from Nigerian Exchange Group. The data were subsequently analyzed using panel least squares regression technique while p-value was used to test the hypotheses formulated at 5% level of significance. The findings obtained in the study showed that long-term debt ratio has a positive and significant effect on net profit margin of quoted consumer good manufacturing firms in Nigeria, short-term debt ratio has a positive and significant effect on net profit margin of quoted consumer good firms in Nigeria while total debt ratio has a positive and significant effect on net profit margin of quoted consumer good manufacturing firms in Nigeria. The study concluded that debt financing contributes positively and significantly to the profitability of quoted consumer goods manufacturing firms in Nigeria. The study recommended among others that consumer goods firms manufacturing should use more of long-term debt ratio as it increases their profitability performance in view the nexus that exist between the dependent and independent variables within the period under review.