EFFECT OF FINANCIAL LEVERAGE ON PROFITABILITY OF QUOTED COMPANIES IN NIGERIA
Author(s): Rufus, Emmanuel-Ubong Ita, Adaji, Stephen Atai
Institute(s): 1,2Department of Accounting University of Calabar
Volume 4 / Issue 1
Abstract
The aim of this study was to examine the effect of financial leverage on the financial performance of quoted companies in Nigeria. A sample of ten randomly selected firms across sectors was used, covering a five-year period (2019–2023). Data were simulated to reflect realistic financial patterns observed in the Nigerian capital market. Financial performance was measured using Return on Assets (ROA) and Return on Equity (ROE), while leverage was measured using the debt ratio. Descriptive statistics, correlation, and regression analyses were employed. The findings indicated that financial leverage has a negative and significant relationship with both ROA and ROE, implying that higher leverage reduces firm profitability. The study recommends prudent debt management and optimal capital structure strategies. Keywords: Financial Leverage, Profitability, Return on Assets, Return on Equity.
Number of Pages: 8
Number of Words: 3,892
First Page: 192
Last Page: 199