Profitability and optimal debt ratio of the automobiles and parts sector in the Euro area (original) (raw)

What determines leverage in selected countries of Cen- tral and Eastern Europe in the automotive industry

Keywords Abstract Financial structure Pro itability Liquidity Non-debt tax shield Asset structure GDP In lation Interest rate The subject of this article is to analyse the inancial structure of companies belonging to the second and third sector. The issue of sources of funding is one of the fundamental decisions of inancial managers and has been a much-debated topic in the last century. A number of studies have been written throughout this period, but there is still no consensus, and there is still a need to expand this area with new knowledge for other countries and sectors. The analysis covers medium and large companies engaged in automotive industry and is located in eleven selected countries including the Visegrad France. The period under review is between 2010 and 2018. The input data come from the Orbis and World Bank database. The research deals with the impact of pro itability, liquidity, asset structure, non-debt tax shield, GDP, in lation and basic interest rate on the total, long-term and short-term debt of companies. Panel regression using the GMM method is used to determine the impact of individual factors on debt levels. The main conclusion of the research is that companies in both sectors are mainly affected by the determinants of the external environment, most of all by changes in interest rates. This research builds on existing knowledge and seeks to disseminate it by focusing on speci ic sectors. From a practical point of view, the results of the research could help companies from the researched sector to optimize their sources of inancing with regard to the in luence of external determinants, which proved to be more signi icant.

Automotive Sector Financial Performance Dynamic Model: Europe vs. Asia Case Study

Mathematics (ISSN: 2227-7390), 2022

The current geo-political context brings to light new challenges to the smooth functioning of the global automotive trade, both through the economic boycott of Russian units and the intensified transition to the green economy. The main objective of the research is to quantify the financial efficiency of the global automotive industry in order to determine a general dynamic performance model and quantify the impact of external regional factors on the performance of economic entities in the automotive sector. The current objectives of the study are identifying recent asset developments in the industry, the main performance models in the literature, designing a global financial performance model and other regional dynamic models, validation of these models and dissemination of the model results and proposals. The used methods are of an empirical nature, namely, the literature study, with the authors aiming to identify the main performance models promoted by specialists in the field. We use qualitative-analytical and forecasting methods for dynamic performance modelling, using information from the 2010-2021 financial reports of major car manufacturers. The results of the study highlight the need for performance in relation to the influence of regional factors and performance leaders by economic and financial chapters. The results are useful for both managers of economic entities and supra-regional decision makers in order to establish economic development strategies and policies in view of the transition to the green economy and in the current geopolitical context.

THE EFFECTS OF PROFITABILITY RATIOS ON DEBT RATIO: THE SAMPLE OF THE BIST MANUFACTURING INDUSTRY

The factors affecting debt levels of firms are related to the course of economy as well as the profitability of companies. But it is quite difficult to make a prediction about the course of economy. In this study, it is aimed to reveal how profitability indicators of companies affect debt levels. The purpose of this study is to examine the relation between the debt and profitability ratios of the companies that operate on the BIST (Istanbul Stock Exchange Market) manufacturing industry by using Panel Regression Analysis. The data of the 86 companies within manufacturing industry on the BIST between the years 1994 and 2015 were used. Furthermore, the variables such as asset growth ratio, return on asset, current ratio, leverage ratio, cash rate, new borrowing rates, total financial liability/total liability ratio, return on equity, investment and earnings have been studied. It has been observed in the study that the active growth and the return on equity ratios affect the new borrowing variables positively while investment, current earnings per share ratios affect the new borrowing variables-negatively. In addition, it has been determined in the study that the return on investment, the return on assets and the current ratios affect the leverage ratio negatively while the active growth, the return on equity, the earnings and the cash ratios per share affect the leverage ratios positively. It has also seen that the active return on assets and the earnings per share ratios affect the total financial liabilities/total liability ratios negatively while the asset growth ratios affect the total financial liabilities/total liabilities ratios positively.

Comparative Analysis of Financial Performance Upon Automotive Companies Registered in BEI

International Journal of Science, Technology & Management, 2021

This research was conducted to determine the financial performance of automotive companies listed on the IDX for the period 2012 to 2015. This type of research is a quantitative descriptive study, with a total population of 13 companies and a sample of 6 automotive companies that have been selected from the population with using purposive sampling method. The data analysis method used is a comparison method consisting of a cross sectional approach and time series analysis. The results show that the results of calculations using the cross-sectional approach, automotive companies in Indonesia for the 2012-2015 period experienced fluctuations and experienced a decline in the industry average at the end of 2015 and many automotive companies were in unhealthy condition in the 2012-2015 period. Based on the results of time series analysis of automotive companies in 2012-2015, it is known that the Total Assets Turn Over has decreased, the results on Net Profit Margin have decreased, the re...

The Casual Relationship Between Debt and Profitability: The Case of Italy

This paper examines the impact of debt on corporate profitability using a longitudinal sample of 7,370 Italian SMEs operating in the commerce sector during 2006-2010. Being based on the simple moving-average analysis of the profitability ratios, as a result of debt changes, econometric evidence supports the hypothesis that there is a non-monotonic relationship between debt and profitability. However, if the non-monotonic correlation is ignored, the debt-profitability relationship is likely to be negative in some areas of Italy. Otherwise, in regions where the demand for bank credit is higher (or the bank supply is lower), the negative correlation is muffled by a reverse effect: less financial resources make the evaluation of credit-worthiness more selective. Consequently, highly levered firms are considered to be those that have primarily higher profitability, and, then, the best rating.

The Influence of Bank Credit on Financial Structure and Financial Return for the Romanian Companies Active in Car Parts Distribution

Accounting and Finance Research, 2020

In this research, we analyze the dependence between financial return (as a dependent, endogenous variable) and bank credit (the volume of bank credits and the cost of borrowed capital, both expressed as independent, exogenous variables), applicable to Romanian companies that deal in the wholesale trade sector of parts and accessories for motor vehicles. Using the 2008–2017 time series panel data model on companies in this sector, we conclude that there is a relatively modest link between financial performance and bank credit., thus illustrating that the main factors generating financial returns are asset rotation (long-term investment efficiency in income generation) as well as operational profitability margin. We also discuss the diagnosis of capital returns in the analyzed sector by decompiling it into margins, rotation and capital structure (DuPont) rates.

Determinants of Profitability in Indian Automobile Industry

The automobile industry has emerged as sunrise sector in the Indian economy. It embarked a new journey in 1991 with de-licensing of the sector and subsequently opening up for 100% FDI through the automatic route. The industry produced a total 25,316,044 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in April-March 2017 as against 24,016,599 in April-March 2016, registering a growth of 5.41 percent over the same period last year. Therefore, automobile companies have been selected for this study in order to determine their profitability during the study period. A firm's Profitability is determined by leverage, size, age, working capital, assets turnover ratio etc. Data required for the study is Secondary in nature. The secondary data have been collected from the Capitaline database from 2008-2017 for the select Motor Cycle companies. The collected data is analyzed by making use of correlation and Multiple Regression. The result reveals hat there exist relationship between age, expenses to income ratio and assets turnover ratio on profitability.

Liquidity and Profitability Analysis of Selected Automobile Companies

International Journal of Supply Chain Management, 2018

Liquidity management and Profitability of a firm is of a major importance in the current scenario majorly for financial management decision. The most accepted fiscal performance can only be achieved by organizations who can maintain a tradeoff between profitability and liquidity position of the organization. The main objective of this study is to know the importance of both of them. In this regard, researchers are interested in the study of Automobile companies. It is known that mangers can increase the profitability and sustain liquidity by working on various ratios of the companies like, Current ratio, liquidity ratio etc. It can also emphasize on maintaining the cost of goods sold and analyzing the various areas of operations in order to strengthen the financial position of the country. All financial ratios are used to assess the performance of the company but profitability ratios are helpful in calculation of the operations invested. Various liquidity ratios are also calculated ...

The Automobile Industry in and Beyond the Crisis

OECD Economics Department Working Papers, 2010

The automobile industry in and beyond the crisis This paper considers the role of the automobile industry in the current cycle. It shows that the industry is economically important and its cycle is intertwined with business cycles. After casting some light on the sources of the collapse in car sales at the start of the crisis, the policy measures, in particular car scrapping programmes, put in place to support the automobile industry are discussed. The paper also derives short and medium term projections of car sales. While a rebound in car sales is likely in North America, Japan and the United Kingdom, car sales in Germany have been pushed significantly above trend and may weaken going forward. Over the medium term, in mature markets such as Europe and North America, trend sales are likely to remain stagnant. By contrast, rapid increases are foreseen in China and to a lesser extent in India. Medium-term projections suggest that capacity exceeds trend sales by around 20% in the five largest Western European markets considered as a whole. Without an adjustment in capacity, these countries would need to ensure an ongoing strong export performance. By contrast, automakers in the NAFTA area would need to halt their decline in domestic market share or to rely increasingly on exports in order to avoid excess capacity. In order to maintain their high levels of capacity utilisation, Korean and Japanese manufacturers will need to keep up their strong export performance.

Insolvency Risk. Application of Altman Z-Score to the Auto Parts Sector in Romania

International Journal of Innovation and Economic Development, 2020

This paper intends to apply the Altman Z-score model to all the companies active in the wholesale of motor vehicle parts and accessories (NACE 4531), with extended financial statements. Using the panel data model over the time series for 2008-2016 on the companies of this sector, we conclude that 99% of the Z-score is explained by the independent variables (working capital, capital structure, turnover, earnings before interest and tax), with estimated parameters very close to the model`s classical values. The sample description of the paper and the corresponding results highlight the Z-score evolution by turnover clusters and principal components, with the largest companies performing the best (the only cluster with Z-score median above 3). We notice a tendency for decreasing high-risk companies and increase in the medium risk companies, whereas the low-risk companies are relatively stable. This improvement is mostly due to the increasing capitalization rate and less external debt, ...