Abstract

Abstract
The quest to determine the relationship between firms’ capital structure and its strength in improving financial performance, especially profitability motivated the researcher to conduct this study. This study was carried out to determine whether there is any relationship between financial performance and profitability performance. In view of this, the study among others is carried out to investigate the effect of gearing on ROA, ROE and ROCE on selected food product companies in Nigeria. The methodology adopted was non probabilistic technique through the use of purposive sampling. The population of the study comprises of food product companies that have been quoted on the floor of Nigeria Stock Exchange over five (5) years between 2009 and 2013. The data have been collected through the published annual report of the firms selected. The findings revealed that gearing has no significant effect on ROA, ROE and ROCE. For instance, gearing will cause a negative -0.0411856 unit change in ROA of the companies. Also, the coefficients of gearing shows that one unit change in gearing will cause a negative -0.0099022 effect on ROE whereas, the coefficients of gearing for ROCE shows that one unit change in gearing will cause a positive 0.0049688 unit change in ROCE of sampled companies. The study established that capital structure has negative effect on Return on Assets and Return on Equity but positive effect on Return on Capital Employed. It is thereby recommended that the management should reduce the level of gearing in order to enhance profitability performance. Also, management should make efficient use of the resources available with a view to reduce expenses for the firm, embark on more promotion to make their product acceptable by consumer and observe production process with a view to reduce wastages, since gearing could only explain barely very small level of change in profitability index as measure by the study.