The Effect of Selected Financial Ratios on Profitability: An Empirical Analysis of Listed Firms of Cement Sector in Saudi Arabia (original) (raw)

Financial Ratio Analysis as a Determinant of Profitability in

2013

Financial ratio analysis is a vital one since the profitability of an enterprise is directly affected by such decision. The successful selection and use of appropriate financial ratio is one of the key elements of the firm's financial strategy. Hence, proper care and attention need to be given while such decision is taken. The purpose of this study is to examine the relationship between the financial ratio analysis and profitability of the Nigerian Pharmaceutical industry over the past eleven (11) years period from 2001-2011. These financial ratio analyse have immense potentials to help organizations in improving their revenue generation ability as well as minimization of costs. The researcher used five (5) variables for the analyses such as: Inventory turnover ratio (ITR); Debtors' turnover ratio (DTR); Creditors' velocity (CRSV); Total assets turnover ratio (TATR) and Gross profit margin (GPM). Profitability as a dependent variable is represented by Gross profit margin (GPM) while financial ratio analysis stands as ITR, DTR, CRSV and TATR for independent variables. Secondary data were obtained from the financial statements (Balance sheet and Profit and Loss account) of the selected quoted pharmaceutical companies' financial statement. The data have been analyzed using descriptive research method and multiple regressions to find out the relationship between the variables. The results of the analysis showed that there is a negative relationship between all independent variables with profitability in the Nigerian pharmaceutical industry. It also revealed that debtors' turnover ratio, creditors' velocity and total assets turnover ratio have no significant relationship on the profitability of the company while only inventory turnover ratio shows a significant relationship with profitability. The results further suggested that only 17.8% of the independent variables are determinant factors of profitability in the enterprises sampled while 82.2% of the major factors are determine from other factors outside the independent variables. Based on the above premises, the researcher recommended that the inventories of the company should be checked and monitored more frequently by management to prevent out of stock syndrome or over stocking of their products. It is also recommended that creditors' velocity should be at a point where the creditors and purchases are equal in order to take the advantage of credit facility and any discount associated with prompt payment for goods to increase the profitability of the company. The management should utilize its assets efficient in generating more income for the company.

THE EFFECT OF FINANCIAL RATIOS, FIRM SIZE AND CASH FLOWS FROM OPERATING ACTIVITIES ON EARNINGS PER SHARE: (AN APPLIED STUDY: ON JORDANIAN INDUSTRIAL SECTOR

─Abstract ─ The objective of this study is to examine the effect of accounting information on earning per share (EPS) by using five categories of financial ratios. A sample of 40 companies listed in the Amman Stock Market was selected. To measure the impact of financial ratios on EPS multiple regression method and stepwise regression models are used by taking profitability, liquidity, debit to equity, market ratio, size which is derived from firm's total assets, and cash flow from operation activities as independent variables ,and EPS (Earning Per Share) as dependent variable. The results show that profitability ratio (ROE), Market ratio (PBV), cash flow from operation/sales, and leverage ratio (DER) has significant impact on earning per share.

Analysis of Financial Statements as Assessing the Financial Performance (Study at the Cement Sub-Sector Manufacturing Period 2016-2018)

Ilomata International Journal of Management

The significant growth of the domestic cement industry has increased competition between companies, thus demanding that companies improve their financial performance. For this reason, this study was conducted on three cement sub-sector companies listed on the IDX in the 2016-2018 periods with quota sampling. Researchers using comparison method to financial performance using liquidity ratios, solvency and profitability ratios with industry standard ratios. The results showed that in terms of the company's liquidity ratio of Current Ratio (CR), Quick Ratio (QR) and Cash Ratio (CsR) of PT. Indocement Tunggal Tbk and PT. Semen Baturaja Tbk shows good financial performance since above the industry average. Meanwhile, PT. Semen Indonesia Tbk shows less financial performance since the CR, QR and CsR are below the industry average. Meanwhile, in terms of the company's solvency ratio by using Debt to Equity Ratio (DER) of PT. Indocement Tunggal Tbk, PT. Semen Baturaja Tbk and PT. Sem...

Debt and Profitability An Empirical Analysis of Listed Firms of Pakistan

Abstract: This study seeks to investigate the issues related to financing decision and the profitability of the listed firms at the Karachi Stock Exchange (KSE). By performing this investigation we try to find out that is Pakistani listed firms at KSE follow any capital structure theory during the period 2000-2010. The study is based on the panel data of 40 non financial listed companies at Karachi Stock Exchange for the period of 2000-2010. Comprehensive descriptive analysis was conducted to find out mean, median and standard deviation for better understanding of readers. OLS Regression analysis is used to analyze the relationship between profitability and financing by debts. The relationship is found for short term debts, long term debts and total debts. Size and growth are used as control variables in the study. The results regarding leverage and profitability reveal that there is an inverse relationship between the use of debt in capital structure and profitability. The over usage of debt in the capital structure is responsible for these results. Size and sales growth has positive relationship with the profitability. This study investigates the issues relating to the capital structure and firms performance in terms of profitability. All firms need operating capital to support their sales. To acquire operating capital, funds must be raised in the form of a combination of equity and debt. For any business organization the financing decision is very critical because of the need to maximize the profit to the financing constituencies, and also for the survival of firm in its competitive environment with that optimal capital structure. The choice among the best proportion of debt and equity can affect the value of the firm, as well as the rate of return. The most of the factors that are used in this research study is based on previous researches to analyze the relationship among debt financing and profitability of the firms. Basically, we selected the attributes identified by Abor (2005) and planned to test few other variables that are used in various studies. But, there is lack of financial data in the selected sample space and therefore, we include just two additional variable is this research study. This research identified need, to examine use of different capital structures used by the listed companies and its impact on profitability capabilities of these companies. This study is based on the data collected from the sample of 40 listed companies of Karachi stock Exchange (KSE). Keywords: Capital Structure, Profitability, Debt, Equity, Return on Assets, Leverage, Growth, Size

Assessment of Financial Condition: A Case Study of Saudi Construction Companies

2017

This study aims to assess the financial condition of some selected Saudi construction companies. The study adopts the published financial statements of the construction companies listed on Saudi Stock Exchange Market. Traditional financial ratios were employed as assessment tools, necessary financial data concerning the ratios were extracted and saved in Microsoft Excel spreadsheet for the analysis of the financial ratios, and these were compared to the industry's typical median and range. Subsequently, a null hypothesis test was conducted using SPSS 22, to statistically test that there is no significance difference between the companies' median and industry median. The analysis reveals that two companies are financially satisfactory and the third company is in financial distress. However, the companies' financial condition can be enhanced if they are able to manage the companies in such a way that there's increase in their revenues, reduces general overhead costs an...

Impact of Capital Structure on Profitability: An Empirical Analysis of Cement Sector of Pakistan

The purpose of this paper is to examine the impact of capital structure on profitability of cement sector of Pakistan. A panel data of 16 firms listed on the Karachi Stock Exchange was put under study for a period of 6 years (2005)(2006)(2007)(2008)(2009)(2010). Two major sets of variables are used: to indicate capital structure i.e. Debt/Equity Ratio, Debt Ratio, Interest Coverage Ratio, Short term debt to asset, and Long term debt to assets and for Profitability i.e. Return On Equity. The variables were analyzed using Fixed and Random effect methodology by using STATA 11. The results implied that profitability is significantly related to capital structure. Specifically, profitability was inversely related to the amount of liability in a company's capital structure. Therefore, the more debt a firm incur, the worse its earnings is hurt.

The Effect of Debt To Asset Ratio, Long Term Debt To Equity Ratio and Time Interest Earned Ratio on Profitability

BINA BANGSA INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT

This study’s purpose is to analyse the influence of DAR, LDER, and TIER on Profitability. Populations of data are taken food and beverage companies listed in BEI from 2009-2011. Samples taken using purposive sampling method and total of samples used during study period is 39 samples. Hypothesis used in this study is multiple linear regression. Based on F test, the results indicated DAR, LDER, and TIER have a significant effect on Profitability. DAR, LDER, and TIER partial effect on Profitability was evaluated using T test. DAR have a negative and non-significant effect on ROE at -0,252. LDER have a negative and significant effect on ROE at -0,437 and TIER have a positive but non-significant effect on ROE at 0,00020.

The Role of Capital Structure on Firm's Profitability of Listed Cement Sector in Pakistan Stock Exchange

The Role of Capital Structure on Firm’s Profitability of Listed Cement Sector in Pakistan Stock Exchange , 2019

The main purpose of this research is to find out the relationship between capital structure (debt-equity) as and Profitability of the listed cement companies in Pakistan Stock Exchange. Further specific objective is to find out relation of debt equity with gross profit, earning per share, and return on capital and return on equity. The sample is taken from 10 cement companies which are listed on Pakistan stock exchange. The secondary data is taken from 2011 to 2018 (i.e. 8 years). Mean and standard deviation of all ratios and Pearson product correlation analysis is performed with the help of Eviews 9 to find the relationship between capital structure and profitability. This research determines that debt / equity (Capital Structure) is adversely linked with the profitability, it suggests that decrease in the profitability of the organizations is due to increase in debt capital & vice versa.

Saudi Cement Industry - A Comparative Study of Profitability Position during Economic Slowdown

International Journal of Engineering and Management Research, 2021

Infrastructure is one of the favorite projects of every developed and developing nation. Construction industry occupies a prominent place in the infrastructure development of a country. Cement is one the elementary material components in the construction industry. Saudi Arabia has shown a weaker performance in generation of revenue over a period of five years from 2015 to 2019. In a situation of economic slowdown it becomes a challenge for the business concerns to maintain their profitability. The present study is designed to analyze and compare the profitability position of cement companies in the kingdom of Saudi Arabia during this period. The study belongs to top five cement companies in terms of market value and revenue generation in the kingdom of Saudi Arabia. To measure the profitability gross profit ratio, operating ratio, operating profit ratio, net profit ratio and return on investment have been used as variables. One way anova has been used to test the hypotheses. The stu...

Impact of Financial Structure on Profitability: A Study on Cement Manufacturing Firms of Bangladesh

The Cost and Management, 2022

The objective of this paper is to evaluate how the financial structure's elements affect the profitability of DSE listed cement manufacturing companies in Bangladesh. Analyzing the secondary panel data for the fifteen-year period between 2006 and 2020, through the use of pooled OLS, fixed effect, and random effect regression estimation model, empirical findings demonstrated that the current ratio (CR) and the short-term debt ratios (STDR), and the debt-equity ratio (DER) have a significant positive association, whereas the equity ratio (ER), the long-term debt ratio (LTDR) has a significant negative association with the profitability indicator ROE. While the CR and the STDR have a significant positive association, and the DER and the LTDR have a significant negative connection with the ROA. Moreover, the firm-specific characteristics, which have been used as the control variables-firm's SIZE, asset turnover (ATO), and GROWTH have a significant positive relationship with the firm's profitability, whereas, the firm's AGE has a negative significant negative relationship with both of the profitability indicators-ROE and ROA. This research adds to the validation of ideas relating a firm's profitability to the choices of sources of finance, both the short-term and the long-term, with a focus on the industry's impact. The findings indicate that the use of short-term debts as a means of financing can increase the firm's profitability while using excessive long-term debts may decrease the firm's profitability. As both short-term debts and long-term debt have a significant association with the firm's profitability, the financial managers should be more attentive while constructing the firm's financial structure.