The Significance and Influence of Financial Ratios on Performance of Non-Financial Companies Listed at Dar es Salaam Stock Exchange Tanzania

Abstract

The purpose of the study was to examine the influence and significance of selected financial ratios and asset turnover of eight non-financial listed companies at the DSE using panel data analysis for a period of twelve years (2010–2022). The data used was extracted from secondary data in the annual financial reports of the companies within the study period. The coefficients of the fixed effect model (FE) regression model were generated. The analysis revealed that return on capital employed and asset turnover had a positive and statistically significant impact on financial performance, while debt-to-equity had a negative and statistically significant impact on the financial performance of the non-financial firms at DSE. However, current ratio and inventory turnover had a positive but statistically insignificant impact, while interest cover ratio had a negative but statistically insignificant impact on the financial performance of the non-financial firms listed at DSE. The study concludes that capital employed and asset turnover are vital in influencing profitability, and managers should manage the return on capital employed so as to enhance business operations, which ultimately improves financial performance. The study recommends that the management team needs to strive for a higher asset turnover to generate higher sales volumes that ultimately lead to high-profit firms and cater to shareholders' goals of wealth maximisation.