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The question of firm performance is very important for different group of people. This is because all agents that have to make any financial decision about a company are concerned with its financial position (Vira2008). Thus, owners, managers, potential investors, banks, other financial institutions, creditors, business partners, employees, and government are always interested in models that help to analyse and predict the performance of the companies.

The sole aim of any business organization is to make profit and most business owners believe that the best way to make profit is to improve in their sales and this brings up another conundrum. In order to increase sales, there must be a corresponding increase in cost because of the increased amount of work involved. These increased costs are what need to be curtailed Olagunju, Imeokparia & Afolabi.

Cost benefit analysis (CBA) is a systematic approach to estimate the short and long term consequences measuring all costs and all possible profits and benefits from an investment project proposal taking into account both quantitative and qualitative factors.

A cost benefit analysis (CBA) can also be defined as an economic technique applied to public decision making that attempts to quantify the advantages (benefits) and disadvantages (costs) associated with a particular project or policy. This technique has been used to analyze policies affecting transportation, urban regeneration, agriculture, public health, criminal justice, defence, education, and the environment. The appeal of Cost benefit analysis is that by monetizing the benefits of the policy, it is possible to compare and/or aggregate many different categories of benefits with one another, and with the costs of the policy.

A program or project would be deemed acceptable if its benefits outweigh the costs. In this sense, a Cost benefit analysis informs decision−makers of both the direction and the strength of social preferences, and thereby also of the social desirability of a project or policy. Out of a number of alternative programs being examined, Cost benefit analysis would recommend choosing the one with the largest net benefits, where net benefits are defined as the benefits minus the costs. Cost benefit analysis or more specifically, the estimation of costs and benefits that is required to perform a Cost benefit analysis also allows one to determine the socially optimal size of the program or project, i.e., the one that maximizes net benefits. At the socially optimum program, the marginal benefits of the program will be equal to its marginal costs.

Financial performance is the measure of how well a firm can use its assets from its primary business to generate revenues. Erasmus (2008) noted that financial performance measures like profitability and liquidity among others provide a valuable tool to stake holders which aids in evaluating the past financial performance and current position of a firm. Financial performance evaluation are designed to provide answers to a broad range of important questions, some of which include whether the company has enough cash to meet all its obligations, is it generating sufficient volume of sales to justify recent investment. Capital structure is closely linked with financial performance (Tian and Zeitun, 2007). Financial performance can be measured by variables which involve productivity, profitability, growth or, even, customers‟ satisfaction. These measures are related among each other. Financial measurement is one of the tools which indicate the financial strengths, weaknesses, opportunities and threats. Those measurements are return on investment (ROI), residual income (RI), earning per share (EPS), dividend yield, return on assets (ROA),, growth in sales, return on equity (ROE),e.t.c (Stanford, 2009).

Therefore, the profitability of a firm is a key concern as it has the ability to absorb market shocks and contribute to the stability of the system in general and the firm specifically. Hence, cost benefit has become the major criterion in determining its financial performance, since investors and other stakeholders pay most of their attention on profitability before dealing with firms. However, some of these businesses have experienced the opposite of their stated objectives, thus for organizations to achieve their set objectives. They must employ different types of firm performance management systems (Kolawole, 2013), considering the fact that, a firm’s performance is likely to be determined by different factors.

One of the main factors that could influence the firm’s performance is cost benefit. Since bankruptcy costs exist, deteriorating returns occur with further use of debt in order to get the benefits of tax deduction and interest. Therefore, there is an appropriate capital structure beyond which increases in bankruptcy costs are higher than the marginal tax-sheltering benefits associated with the additional substitution of debt for equity. Firms are willing to maximize their performance, and minimize their financing cost, by maintaining the appropriate capital structure or the optimal capital structure.

There are different strategies for a firm to achieve a competitive advantage. According to Porter, a firm can gain competitive advantage from three alternatives-cost leadership, differentiation, and market focus. The formulation and implementation of these strategies depend on an effective information system. Information is the fuel that drives management thoughts and actions. In the absence of accurate and relevant information, management would be incapacitated in the formulation and implementation of business strategies for competitive advantage. The traditional management accounting system, which currently provides accounting information for strategy formulation and decision making is in-ward looking and focuses only on financial data thereby hindering its effectiveness in generating external information particularly about the customers and competitors.


There has been an ongoing debate on the issue of cost benefit analysis and financial performance of firms in Nigeria. This controversy is further narrowed down to identifying which of the variables debated is most influential in predicting and determining the cost benefit of manufacturing firms. The cost analysis of a firm is difficult to determine. A firm has to issue various securities in a countless mixture to come across particular combinations that can maximize its overall value which means optimal capital structure.

Optimal cost benefit also means that with a minimum weighted-average cost of capital, the value of a firm is maximized. According to Rahul (1997), poor capital structure decisions may lead to a possible reduction in the value derived from strategic assets. Hence, the capability of a company in managing its financial policies is important if the firm is to realize gains from its specialized resources. The nature and extent of relationship between cost benefit and financial performance of firms have attracted the attention of many researchers. The studies, which are largely foreign based, have however revealed conflicting findings. In Nigeria, most of the studies did not use other components on cost benefit and financial performance. The studies which include Bello and Onyesom (2005), Salawu (2007), Olokoyo (2012), Babalola (2012), Yinusa and Babalola (2012), Sabastian and Rapuluchukwu (2012) and Idode, Adeleke, Ogunlowo and Ashogbon (2014) have left a gap that need to be filled. For example, Salawu (2007), who studied the effect of capital structure on financial performance of selected quoted companies in Nigeria between 1990 and 2004 concentrated on short term debt. His study did not extend to other forms of financing, thus the finding could only be used in the context of short term debt financing. This means even within the purview of debt financing; only the short term aspect of the debt was covered in his study.

In reality, a study on cost benefit is supposed to cover both types of debt financing. Babalola (2012) who also studied the effect of optimal cost benefit on firm’s performance in Nigeria between 2000 to 2009 using samples of 10 firms, concentrated on total debt to total assets. His study excluded the aspect of total debt to equity, short term debt to total assets and long term debt to total assets financing despite the fact that both types of debt financing are used by the sampled firms.

Additionally, Sebastian and Rapuluchukwu (2012) that studied the impact of cost benefit and liquidity on corporate returns of manufacturing firms between 2002 to 2006, focused on short-term debt, long-term debt and total debt without including total debt to total equity financing. The study failed to use total debt to total equity as variable of debt financing.

Owing to these identified gaps, this research was carried on to examine how cost benefit analysis impact on the financial performance of listed manufacturing companies in Nigeria.


The main aim of the research is cost benefit analysis and financial performance of listed manufacturing companies in Nigeria. Other specific objectives include:

1. to determine the relationship between cost benefit analysis and financial performance of listed manufacturing companies in Nigeria.

2. to determine the effect of cost benefit analysis on financial performance of listed manufacturing firms in Nigeria.

3. to examine factors that affect the financial performance of listed manufacturing companies in Nigeria.

4. to investigate various ways manufacturing companies in Nigeria analyses their cost benefit.

5. to examine cost benefit analysis and financial performance of listed manufacturing companies in Nigeria.


1. What is the relationship between cost benefit analysis and financial performance of listed manufacturing companies in Nigeria?

2. What is the effect of cost benefit analysis on financial performance of listed manufacturing firms in Nigeria?

3. What factors affect the financial performance of listed manufacturing companies in Nigeria?

4. What are the various ways manufacturing companies in Nigeria analyse their cost benefit?

5. Does cost benefit analysis affect the financial performance of listed manufacturing companies in Nigeria?


1. H0: there is no relationship between cost benefit analysis and financial performance of listed manufacturing companies in Nigeria.

2. H1: there is a relationship between cost benefit analysis and financial performance of listed manufacturing companies in Nigeria.


The result of this study will be beneficial to both internal and external parties (i.e managers in maximizing investors return, owners in making an informed decision, creditors in ascertaining credit worthiness of a firm, Government in making favorable financing policies etc) to improve on the GDP contribution by the manufacturing sector and also improve on employment rate once the sector is viable since the stake holders are interested in knowing the impact of such decisions on an organization performance.

Also, the government and its agencies will also benefit from this study because the study will highlight the need from its findings if necessary for the government to formulate more favorable financial and economic guidelines as the sector demands and this will sustain the operations of Nigerian Manufacturing firms, especially the potential firms yet to be quoted in the stock market and resultantly contributing to GDP of the nation which have been on the decline hitherto.

The results of this study would also be of benefit to managers, shareholders and creditors of manufacturing firms in Nigeria. Managers would be placed on a sound footing to understand the effect of various financing mix on the operations of their firms. Shareholders would be able to make an informed decision with regard to their equity interest in relation to the debt financing options available to their firms, while creditors would be able to identify the firms that are financially strong enough to settle their claim as at when due.

The outcome of this study would contribute to the existing body of knowledge. Because, though there are a lot of studies on cost benefit and financial performance around the globe, there is dearth of evidence using data on manufacturing firms in Nigeria. The outcome of the study would therefore serve as a reference material for subsequent researchers and would provide a basis for further research in this area.


The scope of study will cover cost benefit analysis and financial performance of listed manufacturing companies in Nigeria.


1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.


Cost benefits analysis: Cost–benefit analysis, sometimes also called benefit–cost analysis or benefit costs analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings

Financial performance: Financial statements are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand.

Manufacturing companies: A manufacturing company is any company that uses components, parts or raw materials to make a finished good. These finished goods can be sold directly to consumers or to other manufacturing businesses that use them for making a different product

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