Abstract
The research studies the relationship between eight firm-specific factors on the profitability of U.S. technology and financial firms. The study used multiple linear panel regression models, namely, ordinary least squares (OLS), fixed effects (FE) and random effects (RE) models. Empirical findings show that return on equity ratio is negatively related with return on assets (ROA), while return on sales ratio has positive relationship with profitability for both technology and financial firms. On one hand, current ratio has a positive relationship with the profitability of the financial firms, while there is negative relationship for technology firms. Lastly, size has positive relationship with the profitability for technology firms. This study provides renewed perspectives in creating suitable strategies to controlling factors that maximizes profitability for both US publicly-listed technology and financial companies.
Highlights
Publicly-listed companies utilize return on assets (ROA) to measure profitability
Results showed that Return on Equity (ROE) ratio negatively affects ROA, while return on sales (ROS) ratio has positive effect on profitability for both technology and financial firms
Current Ratio (CR) has a positive effect on profitability of the US publicly-listed financial firms, while there is negative effect for technology firms
Summary
Publicly-listed companies utilize return on assets (ROA) to measure profitability. This measures how well a firm uses its assets to generate revenue. ROA is an important indicator of asset utilization of every business organization, because asset-intensive companies tend to need more money to maintain the productive capacities of their assets. Good financing choices are necessary decisions that should result in an optimal flow of revenue from existing assets. These choices represent a combination of corporate policy, and an examination of the firm’s finances to maximize profit. It is essential to develop financial strategies, and coherent policies from the firm’s economic and financial point of view
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