RATIO ANALYSIS AS A TOOL OF MONITORING FIRM PERFORMANCE IN NIGERIA IN THE MANUFACTURING INDUSTRY

ABSTRACT

This study aims to evaluate the effectiveness of insolvency and profitability ratio analysis in assessing the financial performance of listed manufacturing companies in Nigeria. The objectives are to compute and analyze key insolvency ratios to gauge firms' ability to meet obligations, calculate profitability ratios to measure operational efficiency and profit generation, and identify potential risks or opportunities based on the ratio analysis. The research employs a quantitative methodology, utilizing secondary data from the financial statements of manufacturing firms listed on the Nigerian Exchange Group from 2018 to 2022. A purposive sampling technique is used to select the sample companies. The data is analyzed using SPSS statistical software, where insolvency ratios such as current ratio, quick ratio, and debt-toequity ratio, as well as profitability ratios including net profit margin, return on assets, and return on equity, are computed and examined. The findings reveal varying levels of financial stability and profitability among the sampled manufacturing companies. While some firms exhibit strong liquidity positions and healthy profit margins, others face potential insolvency risks and suboptimal profitability performance. The 12 analysis highlights the importance of continuous monitoring and timely interventions to mitigate risks and capitalize on opportunities within the manufacturing sector. Based on the analysis, recommendations include implementing strategies to improve working capital management, optimize capital structures, and enhance operational efficiencies to mitigate insolvency risks and boost profitability. Additionally, the study emphasizes the need for robust corporate governance practices and effective risk management frameworks to safeguard the financial stability of manufacturing firms in Nigeria