Effect of Long-Term Debt on Financial Performance of Cement Manufacturing Companies

Abstract

Due to its critical role in overall economic development, the cement industry is identified as one of the areas of the first and second Growth and Transformation Plan (GTP) as a sector of special consideration. However, the main objective of this study is to examine the effect of long-term debt on financial performance in cement manufacturing companies. Moreover, the specific objectives include; examining the effect of long-term debt on return on assets in cement manufacturing companies, also, to examine the effect of long-term debt on return on equity in cement manufacturing companies, in addition, the study identifies two financial performance measures which include; return on assets and return on equity, and directly considered with the relationship of long-term debt. The methodology of this study is exclusive criteria; because the study reviewed only recent studies from 2019-2023 that reported on long-term debt and financial performance. The data is gathered through the means of review and analyzed through identifying the outcome of the reviewed studies. Therefore, based on the majority, the study found a significant negative influence of long-term debt (LTD) on financial performance measured by return on assets (ROA) of cement manufacturing companies and also, a negative effect was found with the financial performance measured by return on equity (ROE) of cement manufacturing companies. In line with the findings, the study concludes that there is a negative effect of long-term debt on financial performance measured by both the (ROA and ROE) of cement manufacturing companies. Similarly, the study recommends that cement manufacturing companies avoid the use of debt in financing their assets; also, the cement manufacturing companies should also focus much on internal financing so as to improve shareholder returns.