LIQUIDITY AND FINANCIAL PERFORMANCE OF CONSUMER GOODS FIRMS IN NIGERIA

This study examines the relationship between liquidity management, cash flow efficiency, and firm
profitability using multivariate statistical techniques. The study employed an expo facto research
design and collected secondary data from the sampled firm`s annual reports and accounts for 10 years.
Drawing on a sample of 55 firm-year observations, the study evaluates the effects of the operating cash
flow ratio (OCFR), current ratio (CURR), and cash asset ratio (CASR) on return on assets (ROA).
Descriptive statistics indicate moderate profitability and liquidity across the sampled firms, with ROA
averaging 1.75 and liquidity ratios exhibiting noticeable dispersion. Skewness and kurtosis measures
fall within acceptable thresholds, supporting the suitability of the data for parametric analysis. Pearson
correlation results reveal exceptionally strong and statistically significant positive associations
between ROA and OCFR (r = 0.992), CURR (r = 0.985), and CASR (r = 0.990), all at the 1%
significance level. Multiple regression analysis further demonstrates that the model possesses very high
explanatory power (R² = 0.994), indicating that liquidity and cash-flow variables jointly explain
approximately 99.4% of the variation in ROA. The operating cash flow ratio and current ratio exert
positive and statistically significant effects on profitability, while the cash asset ratio becomes
insignificant in the multivariate model due to severe multicollinearity. Multivariate tests (Pillai’s
Trace, Wilks’ Lambda, Hotelling’s Trace, and Roy’s Largest Root) confirm that ROA has a highly
significant multivariate effect, with partial eta squared values approaching unity. Overall, the findings
underscore the critical role of operating cash flow efficiency and short-term liquidity management in
enhancing asset-based profitability. The study provides robust empirical evidence that effective
liquidity and cash-flow management are central determinants of firm performance, with important
implications for management accounting practice and financial decision-making.