Affiliation:
1. Ph.D. Assistant Professor, Al-Zaytoonah University of Jordan
2. Master, Research Assistant, Al-Zaytoonah University of Jordan
Abstract
The purpose of this paper is to show the relative impact of liquidity, leverage, and solvency on profitability of industrial enterprises listed on the Amman Stock Exchange to ascertain which of them has the most effect on profitability. To reach the objectives of this study, 44 Jordanian industrial companies are examined from 2012 to 2018. Return on assets (ROA) and return on equity (ROE) are examined as measures of performance, current ratio and quick ratio as measures of liquidity, debt ratio and debt to equity ratio as measures of leverage, and the interest coverage ratio as a measure of financial solvency. Multiple regression analysis was used to check the hypotheses. A negative and statistically significant impact was found at the 1% level between financial leverage and profitability. At the same time, findings did not show the same for the effect of liquidity and solvency on profitability. In addition, leverage has the highest relative impact among independent variables on profitability, followed by solvency and then liquidity. Moreover, it is indicated that company size is a control variable of the effect between liquidity, leverage, and solvency on performance. Thus, it is concluded that management of industrial companies should reduce dependence on debt to finance companies to achieve the highest possible returns; it is recommended to maintain an acceptable level of liquidity to ensure the continuity of companies and attention to the level of solvency within companies to maintain a high financial performance.
Publisher
LLC CPC Business Perspectives
Subject
Strategy and Management,Economics and Econometrics,Finance,Business and International Management
Reference26 articles.
1. Akenga, G. (2017). Effect of liquidity on financial performance of firms listed at the Nairobi Securities Exchange, Kenya. International Journal of Science and Research, 6(7), 279-285. - https://www.ijsr.net/get_abstract.php?paper_id=ART20175036
2. Al-Ali, A. (2018). The effect of financial leverage on liquidity and profitability: An applied study on a sample of companies listed on the Damascus Securities Exchange. Al-Baath University Journal, 40(1), 173-205. (In Arabic). - http://search.mandumah.com/Re- cord/901271
3. Ali, M. (2014). Relationship between Financial Leverage and Financial Performance (Evidence of Listed Chemical Companies of Pakistan). Research Journal of Finance and Accounting, 5(23), 46-56. - https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.662.9837&rep=rep1&type=pdf
4. Aliwi, N. (2019). The effect of financial leverage on the financial performance of the Jordanian public joint-stock companies listed on the Amman Financial Market (Master Thesis). Middle East University.
5. Determinants of Profitability: Evidence from Industrial Companies Listed on Muscat Securities Market
Cited by
9 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献