Financial Leverage Ratio Research Articles

Вплив фінансових показників та екологічних витрат на екологічну ефективність вугледобувних компаній, що мали лістинг акцій на Індонезійській фондовій біржі у 2015-2018 рр.

The purpose of this study is to provide empirical evidence regarding the effect of financial performance and environmental costs on environmental performance. In this study, the financial performance is calculated by the liquidity ratio, leverage ratio, and profitability ratio. Liquidity ratios are represented in the current ratio (CR) and the quick ratio (QR). Then, in this study, the leverage ratio is represented in debt to asset ratio (DAR) and the debt to equity ratio (DER). Profitability ratios in this study are represented in net profit margin (NET), the return of investment (ROI), and the return of equity (ROE). The environmental costs in this study were calculated using the rehabilitation provision, reclamation, and mining closure divided by earnings after tax (EAT). The environmental performance was calculated based on the results of the PROPER rating issued by the Environmental Ministry. This study uses secondary data. Itmeans that the researchers obtain data by accessing financial statements and annual reports of company objects.It collects on the Indonesia Stock Exchange (IDX) website and the official website of each company. This study uses a panel data regression technique that combines cross-section and time-series data. Therefore, the results showed that the liquidity ratio in financial performance and leverage ratio in financial performance affect environmental performance. In contrast, theprofitability ratios in financial performance and environmental costs do not affect environmental performance.

Financial Leverage Determinants on the Financial Performance of a Company

The focus of the researchers is to examine the relationship between different financial leverage ratios like profitability, tangibility, growth and size to know the strength of the variables to justify financial performance of the company. The study is based on the secondary source of information collected from annual reports, websites, RBI bulletins, money control and CMIE reports. It is understood that the financial ratios are the strength of the financial performance assessment of a company for particular period of time which can be done through a well defined and designed research methodology basing on the facts and figures.

Imitation-dynamic model for calculating the efficiency of the financial leverage

The article presents a simulation-dynamic model for calculating the financial leverage efficiency level. The model was developed on the basis of the system dynamics method using Powersim Studio tools. In the constructed model, the calculations were carried out on the example of PJSC «Koks», one of the largest Russian producers and exporters of metallurgical coke. The model was used as a tool to study the capital structure of the enterprise. As a result of the experiments, the level values of financial leverage efficiency, differential of financial leverage and financial leverage ratio were calculated. On the basis of the calculations, the conclusions were made about the quality of management of borrowed capital in the enterprise. In addition the assessment of the developed model of financial leverage efficiency was carried out; as a result of the assessment, both the model advantages and its disadvantages were indicated.

The Effect Of Liquidity On Liabilities: An Application In Automotive Companies

Liquidity refers to the ability of an enterprise to pay off its short or long term liabilities. The higher the profit of companies, the more the liquid assets. The sales, and consequently the profits of automotive companies operating in Turkey have been increasing in the last few years. Liquidity is expected to increase with the increase of profits. The aim of the study is to investigate the correlation between solvency and liquidity of automotive companies. In the application, the eight-year (2010-2017) financial statement data of 11 automotive companies operating in the Istanbul Stock Exchange (Turkey) were used. A panel data analysis was conducted using financial leverage ratio, cash, receivables, inventories, liabilities and revenue variances obtained from the financial statement data. It was determined that automotive companies had 54 percent of their assets in debts. As a result of the analysis, it was determind that there was a positive correlation between financial leverage ratio and receivables, liabilities and inventories, whereas there was a negative correlation between financial leverage ratio and revenues and liquid assets.

Sustainability reporting and firm performance

Purpose- The aim of this paper is to examine sustainability reporting and its relation with firm performance. We investigate whether such reporting practices improve the firm value while enhancing its profitability and the financial leverage impact on sustainability reporting in the automotive industry. Methodology- The paper’s design is based on panel data logistic regression analysis of 155 automotive firms from 20 different countries, between 2010-2018 years. We use financial data such as Tobin’s Q ratio of the public companies as well as firm size, financial leverage ratio and return on assets to measure the firm performance and we work with GRI’s reports on GRI Sustainability Disclosure Database. Findings- We find similar results with some prior literature explaining that sustainability reporting has a significant positive relation between firm size and negative relation with financial leverage. Conclusion- The study provides understandings on the relation of firm performance, firm size, financial leverage, and sustainability reporting. The findings of study indicate a positive significant relationship between firm size and SR, and a negative significant relationship between financial leverage and sustainability reporting in the automotive industry.

The Effect of Financial Leverage, Operating Leverage and Current Ratio on Profitability at PT. Manunggal Persada Jakarta

Funds can be obtained from company owners or from outside parties. The purpose of this study was to determine the effect of financial leverage, operating leverage and current ratio on profitability at PT. Manunggal Persada Jakarta. The method used in this research is descriptive with an associative approach, the sampling technique used is proportional random sampling using the census or saturated sampling method with a sample of 7 years of financial statements. The analysis tool uses classical assumption testing, regression testing, determination coefficient testing and hypothesis testing. The results of the study concluded that the regression coefficient value of Financial leverage of 0.005 was positive with a contribution of 19.3%. Hypothesis testing obtained a significance value of 0.324> 0.05. Regression coefficient value of Operating leverage of 0.001 is positive with a contribution of 16.5%. Hypothesis testing obtained a significance value of 0.368> 0.05. Current coefficient regression value of 0.158 is positive with a contribution of 31.9%. Hypothesis testing obtained a significance value of 0.187> 0.05. Obtained a regression equation Y = 0.110 + 0.009X1 + 0.001X2 + 0.177X3, the regression coefficient value of each positive independent variable with a correlation of 0.927 and a coefficient of determination of 85.8% while the remaining 14.2% is influenced by other factors. Hypothesis testing obtained by calculating Fcount> Ftable or (6.064> 4.120). Thus simultaneously there is a positive and significant effect between financial leverage, operating leverage and current ratio to rentability.

Türkiye Gıda Sektörü BIST-100 Endeksi Bildirimlerine ait Çoklu Doğrusal Regresyon Analizi

Bu çalışmanın amacı, işletme sermayesi yönetiminin firma karlılığı üzerine etkisini araştırmaktır. Çalışmada BİST-100 Gıda sektöründe faaliyet gösteren 28 firmanın 2012 ve 2017 yılları arasındaki verileri kullanılarak çoklu regresyon analizi gerçekleştirilmiştir. Çalışmada bağımlı değişken olarak aktif karlılık; bağımsız değişkenler olarak ise alacak tahsil süresi, stokta tutma süresi, nakit döngüsü, aktif büyüklük(toplam aktiflerin logaritması), büyüme oranı ve finansal kaldıraç oranı belirlenmiştir. Çalışmada aktif büyüklük, büyüme oranı ve kaldıraç oranı ile aktif karlılık arasında istatistiksel olarak pozitif yönlü anlamlı bir ilişki olduğu belirlenmiştir. Ayrıca çalışmada regresyon analizi varsayımlarının sağlanıp sağlanmadıkları da irdelenerek, ele alınan modellerdeki değişkenler arasındaki çoklu doğrusal bağıntı ve tahmin edilen modellere ait hata terimleri arasındaki otokorelasyon problemleri de giderilmiştir.

Factoral Analysis of the Financial Leverage of the Enterprise

The activities of the enterprises always involve some uncertainty, therefore there is always a risk that objectives may not be achieved. So, theoretical and practical aspects of business risks are always relevant. The goal of the research is to select the general indicator of the financial risk between the leverage coefficients of the enterprises and to create its’ factorial model. The subject of research is the system of financial leverage ratios of the enterprise. Financial information on Georgian wine companies is used for the practical provision for research. As a result of the research has been created a new factor model of the general indicator of financial leverage. It is possible to measure five-factor indicators making an impact on the level of financial leverage. Its regular analysis will help enterprise management to fully control and manage the financial risks of the enterprise, to implement adequate measures on the basis of which the financial stability of the enterprise would not be jeopardized, which is also in the public interest.

Managerial risk incentives and a firm’s financing policy

Abstract This paper provides a theoretical explanation for how risk preferences of a firm’s manager impact a firm’s optimal financing policy and shareholder value. The developed model implies that firms in growing industries are more valuable if they are run by more risk-seeking managers. Similarly, firms operating in declining industries should be run by less risk-seeking managers. Given that a firm’s optimal assets do not depend on the growth opportunities, and that debt is the difference between assets and equity, the model implies that there is a negative (positive) correlation between the riskiness of CEOs’ compensation packages and firms’ financial leverage ratios for firms in growing (declining) industries. This prediction is in stark contrast to economic intuition and prior literature in that less risk aversion normally should increase risk-taking. The empirical analysis generally supports all the model’s implications except those related to firms operating in declining industries.

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

<p>The aim of this study is to investigate the determinants of banks’ financial performance in terms of the capital structure. Annual financial statements of 11 banks traded in Borsa Istanbul are employed for the period of 2006-2016. Return on assets, return on equity and earnings per share are chosen for financial performance measures. The independent variables related to the capital structure are capital adequacy, equity-to-asset, and financial leverage ratios. In addition, macroeconomic variables and bank-specific variables are also considered as control variables for the analysis. The data are analyzed by the panel data regression analysis as it provides more informative finding and less multicollinearity among variables than time series and cross-sectional analyzes.</p><p>The Hausman test results indicate that the random effects model is appropriate for the whole dependent variables. According to the findings; while equity-to-asset ratio affects return on assets positively, amongst the control variables specific to firms, firm size, asset quality and asset growth variables have significant effects on return on assets. It is found no significant effect of independent variables on return on equity, however, it is seen that asset quality has a negative and significant effect. Inflation and interest rates have a significant effect on both variables. Finally, it is seen that equity-to-asset ratio has a positive and significant effect on earnings per share. Only the effect of asset quality on earnings per share is found to be significant among the control variables. Findings of the study are consistent with the previous studies. In addition, the M&M views are not supported by the findings related to return on assets and earnings per share but the return on equity.</p>

Ranking of firms by performance using I-distance method

The objective of this article is to rank firms by their financial performance using statistical I-distance method, which has the ability to determine both ranking and important factors. For this purpose, the method was first applied to 110 Turkish industrial firms without any sectorial separation and then to 7 different sectors, and various findings about firms, sectors and variables were obtained. The I-distance method is used to get rid of the high correlation between variables during the analysis. The reason for choosing the I-distance method is that it allows you to sort the variables by importance and eliminate insignificant variables, as well as take into account correlations between variables. The authors believe that the method is superior to other alternative methods thanks to these qualities. Through a number of analyses, it was possible to see positions of firms both within the whole sample and their own sectors. Furthermore, this method provided valuable information on which factors were important in assessing firms’ financial performance. It has been observed in the analyses that the most effective factors in ranking firms and separating them from each other were profitability ratios, and the fact that liquidity and financial leverage ratios are not effective at all. When examined from a sectoral perspective, the nonmetal mining sector and the chemical, petroleum and plastic sectors seem to be better than other sectors in the performance rankings.

Comparison of Financial Leverage Ratio before and after the Use of Off-Balance Sheet Financing in Firms Listed in the Tehran Stock Exchange

The aim of this study was to compare the proportion of financial leverage in companies before and after the use of off-balance sheet financing in firms listed in the Tehran Stock Exchange. The research method was causal-comparative descriptive. The population was all the accepted companies in Tehran Stock Exchange (cars and car fragments, petrochemicals, petroleum products, cement, pharmaceutical, home and sugar appliances) between years of 2010 and 2014 that 87 companies were selected at random. Data were analyzed using independent t-test. Results showed that the average financial leverage for companies which have used off-balance sheet financing was equal to 0.6398 and the average financial leverage for companies that did not use off-balance sheet financing has been equal to 0.5612. Therefore, there was no significant difference between averages of the two samples. Other results showed that the average of return on investment (ROI) ratio in companies that used off-balance sheet financing had no significant statistical reference with an average of return on investment (ROI) ratio in companies that did not use off-balance sheet financing. As well, the average of return on owner’s equity (ROE) ratio in companies that have used off-balance sheet financing had no significant statistical difference with the average of return on owner’s equity (ROE) ratio in companies that have not used off-balance sheet financing.

Factors Influencing in the Fraudulent Financial Reporting

Fraudulent practice in financial report has resulted in the decrease of reliablity in financial report, causing losses for investors and creditors. The population used in this study are all listed on the Indonesia Stock Exchange (BEI) throughout 2010-2016. The sampling method used is purposive sampling. The number of samples used is 52 companies, consisting of 26 fraud companies obtained from the database of sanctioned misstatement of financial reporting issued by OJK during 2010-2016 period and 26 non-fruad companies with the same size determined under OJK regulation No. POJK.04 about Statement of Registration in the Public Offering and Capital Addition by Granting Right of Priority Effect by Companies with Small Scale Assets or Companies with Medium Scale Assets. This study used logistic regression analysis to examine the research hypothesis. The results of this study indicate that financial leverage and asset composition ratio have positive effect on the possibility of fraudulent financial reporting. Meanwhile, the profitability, liquidity, capital turnover, and receivable turnover ratio have negative effect on the possibility of fraudulent financial reporting .

Influence of The Ratio of Profit Margin, Financial Leverage Ratio, Current Ratio, Quick Ratio Against The Conditions and Financial Distress

Financial distress is occurred before bankruptcy. This condition could be predicted by analyzing Financial Statement. This study aims to determine whether there is significant influence between profit margin ratio, financial leverage ratio, current ratio, and quick ratio on Financial distress to determine how much their influeance on Financial distress in a Company. Based on result of data processing using SPSS 17.0 version, the author obtained value of multiple correlation coeffiicient in 2008 is 0.933 (R), it means X1 (profit margin ratio), X2 (financial leverage ratio), X3 (current ratio) and X4 (quick ratio) jointly have strong and positive relationship in predicting Financial distress, And for value of multiple correlation coefficient in 2009, obtained 0.582 (R), it means X1 (profit margin ratio), X2 (financial leverage ratio), X3 (current ratio) and X4 (quick ratio) jointly have strong and positive relationship in predicting Financial distress. Based on F-test calculation in 2008, multiple linear regression is obtained that Fhitung > Ftable. Value of Fhitung is 40,962, whereas value of Ftable is 2,922, it means that Ha is rejected and Ho is accepted. This means regression model can be used to predict financial distress condition or it can be said that X1 (profit margin ratio), X2 (financial leverage ratio), X3 (current ratio) and X4 (quick ratio) jointly influence significanly on Company’s Financial Statement condition (Y). whereas for F-test calculation in 2009, multiple linear regression is obtained that Fhitung > Ftable , value of Fhitung is 13,839 and value of Ftable is 2,922. it means that Ha is rejected and Ho is accepted. This means regression model can be used to predict financial distress condition or it can be said that X1 (profit margin ratio), X2 (financial leverage ratio), X3 (current ratio) and X4 (quick ratio) jointly influence significantly on Company’s Financial Statement condition (Y).

Crisis, sectoral and geographical factors: financial dynamics of Italian cooperatives

PurposeThe purpose of this paper is to analyze the financial structure of Italian cooperatives in the period before and during the crisis (2004-2013), in relation to two discriminating factors. At this end, it focuses on two research questions: What financial dynamics the Italian cooperatives have involved before, during and after the 2008 crisis, that is, in the decade 2004/2013? Are there statistically differences between business sectors and geographic area?Design/methodology/approachSecondary data on AIDA database have been used. The financial structure is assessed using two ratios: the financial leverage ratio and quick ratio. The final sample consists of 1,446 cooperatives. The trend and exploratory analysis, analysis of variance and Tukey-Kramer post-hoc test have been used.FindingsThe financial structure of cooperatives has not been substantially affected by the crisis in any geographic area and business sector, by virtue of resilience of their business model. Moreover, these two factors produce statistically significant differences in the financial structure of cooperatives.Research limitations/implicationsThe study takes into account only the cooperatives that survived the crisis, so, presumably, the strongest. Moreover, another and more ratios should be considered at the end to have a more complete view on the financial dynamics.Originality/valueThe literature on resilience of cooperatives is still not very rich. Moreover, this work analyses and integrates aspects and approaches that are not usually considered together.

Profitability, Liquidity and Financial Risk Analysis: A Study of Auto Industries in India

The concept of Financial Leverage is one of the important areas of making financial decision. The leverage protects the interest of the shareholders in terms of the profit maximization at low cost of capital. The profit of a company is distributed in the form of dividend to their existing shareholders. This paper seeks to analyze the liquidity, Profitability and the financial leverage of the selected automobile companies operating in India. The study was conducted for a period of six years from 2008-09 to 2013-14. Relevant statistical tools and techniques have been applied to conduct the study. The study concludes that that there is significant difference in the CR, QR, ROI and ROE of the selected companies during the study period. The study also revealed that there is no significant difference in the financial leverage ratio.

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

<p>The aim of this study is to investigate the determinants of banks’ financial performance in terms of the capital structure. Annual financial statements of 11 banks traded in Borsa Istanbul are employed for the period of 2006-2016. Return on assets, return on equity and earnings per share are chosen for financial performance measures. The independent variables related to the capital structure are capital adequacy, equity-to-asset, and financial leverage ratios. In addition, macroeconomic variables and bank-specific variables are also considered as control variables for the analysis. The data are analyzed by the panel data regression analysis as it provides more informative finding and less multicollinearity among variables than time series and cross-sectional analyzes.</p><p>The Hausman test results indicate that the random effects model is appropriate for the whole dependent variables. According to the findings; while equity-to-asset ratio affects return on assets positively, amongst the control variables specific to firms, firm size, asset quality and asset growth variables have significant effects on return on assets. It is found no significant effect of independent variables on return on equity, however, it is seen that asset quality has a negative and significant effect. Inflation and interest rates have a significant effect on both variables. Finally, it is seen that equity-to-asset ratio has a positive and significant effect on earnings per share. Only the effect of asset quality on earnings per share is found to be significant among the control variables. Findings of the study are consistent with the previous studies. In addition, the M&M views are not supported by the findings related to return on assets and earnings per share but the return on equity.</p>

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

<p>The aim of this study is to investigate the determinants of banks’ financial performance in terms of the capital structure. Annual financial statements of 11 banks traded in Borsa Istanbul are employed for the period of 2006-2016. Return on assets, return on equity and earnings per share are chosen for financial performance measures. The independent variables related to the capital structure are capital adequacy, equity-to-asset, and financial leverage ratios. In addition, macroeconomic variables and bank-specific variables are also considered as control variables for the analysis. The data are analyzed by the panel data regression analysis as it provides more informative finding and less multicollinearity among variables than time series and cross-sectional analyzes.</p><p>The Hausman test results indicate that the random effects model is appropriate for the whole dependent variables. According to the findings; while equity-to-asset ratio affects return on assets positively, amongst the control variables specific to firms, firm size, asset quality and asset growth variables have significant effects on return on assets. It is found no significant effect of independent variables on return on equity, however, it is seen that asset quality has a negative and significant effect. Inflation and interest rates have a significant effect on both variables. Finally, it is seen that equity-to-asset ratio has a positive and significant effect on earnings per share. Only the effect of asset quality on earnings per share is found to be significant among the control variables. Findings of the study are consistent with the previous studies. In addition, the M&M views are not supported by the findings related to return on assets and earnings per share but the return on equity.</p>

Modern tendencies of financial stability of domestic industrial enterprises

The financial stability of an enterprise is one of the decisive criteria for its financial status and successful operation in general.The article analyzes the financial sustainability of industrial enterprises of Ukraine in ‎2008–2016 according to the main indicators (the coefficient of autonomy, the ratio of own capital debt coverage, the coefficient of financial leverage ratio, the coefficient of working capital maneuverability, the coefficient of current debt, the coefficient of financing sustainability), and determines the type of financial stability. The conclusion is drawn about unsatisfactory financial sustainability over the entire period under investigation with the indication of individual trends.To determine the factors that influenced the formation of unstable financial conditions of domestic industrial enterprises, the multifactorial models of multiple regression were built; the models included macro and microenterprise factors of the functioning of enterprises (the index of industrial producers' prices, the turnover of current assets, NBU discount rate). The obtained dependence proved the predominant influence of macrocolars on the formation of financial sustainability of industrial enterprises of Ukraine during ‎2008–2016. This made it possible to formulate the proposals on priority measures for stabilization of enterprises’ activity in the near future.

Pengaruh Financial Leverage terhadap Financial Performance pada Sektor Industri Manufaktur yang Terdaftar di Bursa Efek Indonesia (BEI) Periode 2015

The manufacturing sector is one of the most dominant economic sectors in in achieving growth and development in Indonesia. It needs adequate fund to develop its business. The sources of fund are from internal and external. The firm usually optimized the usage of internal fund prior to external fund. The internal fund comes from equity while the external funds are from debt and stock. Debt is also known as financial leverage. There is a phenomenon that the usage of debt increased the firm’s financial performance, since interest on debt could lower the payment of tax (tax shield). On the other side, the higher the financial leverage the higher the risk of bankruptcy. This research aims to analyze whether financial leverage has an influence on financial performance in the manufacturing sector listed on the Indonesia Stock Exchange (IDX) period 2015. The method of analysis used in this research is multiple linear regression analysis. This research uses quantitative approach with a sample of 140 listed companies in the manufacturing industry. The firm’s financial performance could be measured by the financial ratios. Financial Leverage ratios are ratios that measure the ability of firm’s to meet its financial obligation and the level of usage debt as compared to equity. There are several financial leverage ratios that used in this research, such as Debt Ratio (DR), Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), and Long Term Debt Ratio (LTDR). Financial performance indicates the ability of firm to generate profit and measured by Profitability Ratio. Return on Asset (ROA) is one of the Profitability Ratio. The statistical result shows that Debt Ratio (DR) negatively affect Return on Asset (ROA) and Interest Coverage Ratio (ICR) positively affect Return on Asset (ROA). Meanwhile, Debt to Equity Ratio (DER) and Long Term Debt Ratio (LTDR) did not affect Return on Asset (ROA). On the other hand, result shows that Debt Ratio (DR), Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), and Long Term Debt Ratio (LTDR) affect Return on Asset (ROA) simultaneously.
 Keywords: Financial Leverage, Debt Ratio (DR), Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), Long Term Debt Ratio (LTDR), Financial Performance, Return on Assets (ROA)