INTERNATIONAL JOURNAL OF RESEARCH IN ECONOMICS AND SOCIAL SCIENCES(IJRESS) AVAILABLE ONLINE AT: HTTP://EUROASIAPUB.ORG VOL. 8 ISSUE 9, SEPTEMBER- 2018 ISSN(O): 2249-7382 | IMPACT FACTOR: 6.939 | International Journal of Research in Economics & Social Sciences Email:- editorijrim@gmail.com, http://www.euroasiapub.org (An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.) 46 FINANCIAL LEVERAGE AND PROFITABILITY OF QUOTED FOOD AND BEVERAGE COMPANIES IN NIGERIA Joseph I. Onyema Department of Banking and Finance, Rivers State University, Port Harcourt Joy U. Oji, Department of Banking and Finance, Rivers State University, Port Harcourt Abstract This study examined financial leverage and profitability of quoted food and beverage firms in Nigeria. It is aimed at studying the relationship between measures of financial leverage and profitability. Time series data were sourced from the financial statements of the selected food and beverage firms and were subjected to rigorous statistical analysis such as the Augmented Dickey Fuller test, co-integration test, granger causality test and vector error correction models. They were used to examine the dynamic relationship that exists between the dependent and the independent variables. The level series result in model one found that total liability ratio relates negatively with return on equity (ROE) and return on assets (ROA) which were used as the dependent variables in the models while long term debt, equity ratio, debt ratio and debt equity ratio relate positively with the dependent variables. Model two found that total liability ratio, long term debt ratio, debt equity ratio and debt ratio have a negative relationship while equity ratio has a positive with return on equity. The Augmented Dickey Fuller test found that the variables are stationary at first difference; the co-integration test found the presence of long run relationship while the Granger causality test found a bi- directional relationship to exist between the independent and independent variables. The study concludes and recommends that firms going for debt financing should adopt debt financing mix of debt ratio, equity ratio and total liability ratio. Of these, debt ratio should be more vigorously pursued for its profound salutary effect on the profitability of quoted food and beverage firms in Nigeria. Keywords: Financial Leverage, Profitability, Food and Beverage Firms, Debt Equity Ratio, Total Debt Ratio. Introduction Financial leverage is traditionally viewed as the use of debt component of capital structure, through the use of fixed income securities, such as loans and bonds. It has a significant influence on the company’s ability to achieve its ultimate goal, such as maximizing the shareholders wealth (Taani, 2012). Increased leverage results in increased return and risk (Tally, 2014). However, the use of leverage is associated with two different possible