Abstract:
Recent cases of corporate failure in the 21st Century have prompted shareholders and other stakeholders to strictly monitor financial performance of their firms with sales growth being seen as the primary driver of sustainability. This study aimed to determine the effect of sales growth on the financial performance of listed Agricultural Companies at Nairobi Securities Exchange in Kenya from 2003 to 2013.The study was anchored on the theory of the firm growth that recognizes that increments in sales over the years affects financial performance of an organization. A panel design with descriptive and causal study design was adopted and all the listed companies in the agriculture sector in Kenya were studied. Sales increments in each year was used as a measure of sales growth while financial performance was measured by return on assets (ROA), return equity (ROE) and earnings per share (EPS). Inferential statistics (correlation and regression) was used for data analysis. A pooled OLS regression model was used to incorporate the time and space movements. The study affirms that sales growth has a
positive and significant effect on financial performance measures ROA and ROE and negative and insignificant effect on EPS. From the study findings there is clear evidence to conclude that as the firm increases sales, financial performance as measured by ROA and ROE also growth opportunities since it exerts a significant effect on financial performance. However, other need to be explored as a percentage growth in sales only leads to 11% improvement in ROA and ROE.
