Free Cash Flow Activities and Financial Performance of Listed Pharmaceutical Firms in Nigeria

This study aimed at evaluating the effect of free cash flow activities on the financial performance of listed Pharmaceutical firms in Nigeria. The specific objectives of this study were to evaluate the effect of operating cash flow, changes in working capital, non-cash expenses and capital expenditure on return on assets of the selected Pharmaceutical firms. The study adopted an ex-post facto design. Data were generated from the audited financial reports of the seven selected listed Pharmaceutical firms in Nigeria from 2010-2021. Panel multiple regression technique was employed to analyze the data using Stata 14.2. The study found that operating cash flow and changes in working capital have significant positive and negative effect on return on assets with t-statistics and (p-values) 4.93(0.000) and -5.47(0.000) respectively investment in non-current assets exerted a non-significant negative effect on return on assets with t-statistics and (p-values) -0.06(0.950) and -0.27(0.785) respectively. These results imply that only operating cash flow contributed positively to financial performance among the free cash flow activities. Therefore the study recommended efficiency in free cash flow management, particularly the management of working capital to cushion the adverse effect of financial performance of the firms.