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Liquidity Constraints and Financial Performance: An Analysis of Consumer Goods Firms in Nigeria

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  • April 6, 2026
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Ojeh Augustine, Ph.D., FCA1, Eze, Joseph Chukwudi Ph.D.2, Sylvia Nnenna Eneh Ph.D.3 & Festus Ndubuisi Nkwo 4

Abstract         

This study examines the effect of financial ratios on the financial performance of consumer goods firms in Nigeria between 2014 and 2023, with Return on Assets (ROA) serving as the measure of profitability. The specific objective was to assess how Current Ratio (CR), Quick Ratio (QR), Cash Ratio (CAR), Working Capital Ratio (WCR), and Operating Cash Flow Ratio (OCFR) influence ROA. Using panel data from listed consumer goods firms and applying panel least squares regression analysis, the study found that three of the examined financial ratios had a statistically significant effect on ROA. Quick Ratio (β = 0.0962, p = 0.0207) and Operating Cash Flow Ratio (β = 0.2317, p = 0.0006) exhibited statistically significant positive relationships with ROA, indicating their strong influence on firm profitability. In contrast, Current Ratio (β = 0.0101, p = 0.6221), Cash Ratio (β = -0.2941, p = 0.0030), and Working Capital Ratio (β = 0.0216, p = 0.6437) had mixed or statistically insignificant effects on ROA. Descriptive statistics revealed notable variability in firms’ liquidity, leverage, and profitability levels, highlighting sector-specific challenges. The findings imply that external factors, such as regulatory conditions, market volatility and operational inefficiencies may also significantly shape profitability. The study concludes that while financial ratios are valuable internal tools for monitoring performance, they may not fully capture all the dynamics affecting profitability in consumer goods firms. It recommends that firms adopt a more integrated approach combining financial indicators with contextual and strategic factors to enhance long-term performance and resilience.

Keywords: Return on Assets, Current Ratio, Quick Ratio, Cash Ratio, Working Capital Ratio, Operating Cash Flow Ratio, Consumer Goods Firms, Financial Performance

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