The Influence of Growth on Return on Assets: A Case Study of Nestle Pakistan

Abstract

The investigation is focused arranged finding that whether Growth (Sales) and Liquidity has impact on Return on Asset (ROA) in FMCG particularly Nestle Pakistan. The study is focused on finding the liquidity as the firm must have sufficient liquidity items in order to meet the emergency condition as firm can easily achieve the hand on cash with profitable liquidity items whereas non liquidity item can lead to great damage to the organization. In this study secondary data has been collected from various annual financial statement of Nestle Pakistan from its website. The sample size is from 2005 to 2017. For the analysis three variables are considered such as return on asset growth in terms of sales and Liquidity ratio of the Nestle Pakistan. The various statistical techniques have been applied such as OLS Regression and Johnson co-integration for the conclusion of this study. Findings of this study revealed that growth (sales) found to have positive and significant impact on return on asset of nestle Pakistan. Whereas, the liquidity has found to have insignificant influence ROA. The co-integration indicates that growth (sales) is found to have long run relationship but variable liquidity has no long run relationship with return on assets in context of nestle Pakistan.  There are number of FMCG companies are operating Pakistan, they can use findings of this study in their future strategies for better profitability in context of Pakistan’s operations.