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The Influence of Profitability Ratios and Company Size on Profitability and Investment Risk in the Capital Market

Abstract

A study was conducted of 15 food companies listed on the Warsaw Stock Exchange. The profitability of companies was measured by: return on assets (ROA), return on equity (ROE) and return on sales (ROS). Investment risk was measured by standard deviation and semi-deviation. The main objective of the study was to examine whether the average level and variability of selected indicators of profitability are reflected in the average level and the variability of returns on the capital market. An additional aim was to examine whether the size of the company affects the profitability and risk of investment in stocks as well as the average value and the volatility of profitability ratios. A positive correlation between the average value of the profitability ratios (ROA and ROS) and the average rates of return on the capital market was identified. Similarly, companies with higher volatility and semi-volatility of profitability ratios were simultaneously characterized by larger fluctuations in rates of return on the stock market. Studies have shown that the size of the company is negatively correlated with the risk of stock market investments and the volatility of profitability ratios.

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Assessing the usefulness of accounting measures for examining profitability of the State Forests’ National Forest Holding

Abstract

The purpose of this study was to analyse the profitability of the State Forests by using accounting measures and to determine their practical applicability for evaluating the State Forests’ activities covering the years 2008-2012. In our assessment, we used the ratios: return on assets, return on equity and return on sales, which were calculated for the four following levels of financial result: operating result and economic activity result, gross profit and net profit. The degree of variability of the analysed ratios was determined for the years 2008-2012. On the basis of our survey, the State Forests’ activities were found to be profitable. The ratios return on assets, sales and equity show only slight variation depending on the applied category of financial results. Furthermore, this study confirms that there is a high degree of variation over time. In the years 2008-2012, the profitability ranged from 2% to 13% with the highest profit having been reached in 2011. We conclude that for the State Forests’ activity assessment, the profitability ratios established for the category of operating results will be of great significance.

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Levels of Management and Economic Performance of Companies

Summary

In order to achieve competitive results, the manager must master the skills necessary for subsequent levels of management. In the present study we have verified three hypotheses regarding the correlation between the level of control and efficiency, a form of ownership and influence on the managing level to direct and indirect subordinates. Two of the hypotheses gained the expected level of significance and the third was statistically insignificant.

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Developments of the CEE banking sectors after the financial crisis

Abstract

The banking sectors of the Central and Eastern European countries performed better than other developed European sectors during the crisis, due to their sound capitalization and a high profitability before the crisis. However, some of those banking systems were very hit in terms of the non-performing loans ratio or cost-to-income ratio. That is why we consider that it is interesting to see how they performed in terms of the banking performance ratios during the last years in the light of the new international capital adequacy regulations and in the light of the latest national macroeconomic developments of those economies and what are the main threats for these CEE banking sectors in the present.

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New Types of Assessments of Community Pharmacy Technology Business and Their Contribution Towards Prosperity of the Community Pharmacy

The new approach how to assess community pharmacy business by monitoring indicators of financial analysis, contributes to a positive economic development in the community pharmacy business. The better is understanding and analysis of the financial statements in the community pharmacy business, the better will be improvement in managing and controlling finances. Financial analysis enable the community pharmacy to make more informed decisions, comparisons of actual financial performance with forecast targets, performances in past years and comparisons to industry averages. The most important analysed financial statements are balance sheet and profit and loss statement. The outcomes of the financial analysis are debt, efficiency, profitability, liquidity ratios and working capital ratio. They are compared to recommended values and the suggestions are made to improve community pharmacy´s efficiency and prosperity. The result of the new approach to assessment community pharmacy technology business will contribute to positive financial development of the community pharmacy and it´s maintenance or survival at the upcoming time.

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Chosen aspects of economic profitability in agricultural companies in the context of global economic crisis

Abstract

Negative consequences of the economic crisis, which began in the United Sates in 2007, affected economies of all countries. The unfavourable economic situation on world markets was also reflected in the financial condition of Polish companies. It also refers to agriculture which plays a significant role in Polish economy. The following paper covers change trends in economic profitability of a group of 10 agricultural companies. Chosen liquidity and profitability ratios have been presented as well as synthetic measure which is at the root of the compilation “Ranking of 300 best agricultural companies”. The presented findings cover the years 2007-2012.

Open access
Analysis and profitability assessment of Polish construction companies threatened with bankruptcy

Abstract

This paper presents analysis of profitability indicators of Polish construction companies threatened with bankruptcy compared to analogous indicators obtained by Polish construction entities as a whole.

The analysis concerns companies generating positive and negative financial results (both EBIT and net financial results). Moreover, the operating profitability ratio, return on sales, and return on total assets ratios have been verified.

The analyses have been conducted using financial reports of Polish construction companies which went bankrupt in 2013, as well as financial data of construction sector participants as a whole.

Open access
Is profitability a good proxy for efficiency? Evidence from the subsector of tour operators

Abstract

The goal of the paper is to evaluate the economic efficiency of tour operators in the Czech Republic in the period 2007-2014 using data envelopment analysis (DEA) models and prove the link between economic efficiency and profitability and to find out if profitability is a good proxy for economic efficiency. Data was exported from the database Albertina CZ Gold Edition. We calculated the efficiency score using CCR (Charnes, Cooper and Rhodes) and BCC (Banker, Charnes and Cooper) models based on 3 inputs and 1 output. In the years 2007 to 2010, the efficiency score of almost all the companies was higher than 0.5; however, in years since 2011, we revealed significant differences in the efficiency of individual firms and only about 40 percent of tour operators achieved an efficiency score higher than 0.5. Using Pearson and Spearman correlation coefficients, our findings show that, in the case of the Czech tour operator market, profitability ratios do not correspond with firm efficiency. Profitability ratios are not a good proxy for economic efficiency and should not be used as the only firm criterion of performance.

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Financial Performance in the Light of Corporate Governance in Polish Family Businesses

Abstract

The article presents a view (on the basis of theoretical and empirical analysis) of corporate governance models used in Polish family businesses through financial performance. The empirical analysis covered a sample of 24,000 Polish family businesses in the period of 2008–2013. The use of linear regression has allowed the authors to verify the hypothesis concerning the occurrence of differences in profitability ratios in groups of family businesses using variant management models and allowed verifying the relationship between the degree of control and involvement of the owners in management and financial performance. The received results, though inconclusive, indicate that the involvement of the owner in the governance process can affect the financial aspect of a business. The prepared empirical analysis and conclusions of the article contribute to a better understanding of the measures taken on management and control decisions; what is more, they can provide guidance to the owners of family businesses in shaping the corporate governance model.

Open access
The Relationship between Capital Structure and Profitability of the Limited Liability Companies

Abstract

Capital structure is very important, especially the decision which concern with this problem, because the profitability of a company is directly affected by such decision. The successful choice and use of capital is one of the key components of the enterprises financial strategy. This means that it is the vital to pay attention and proper care capital structure. The aim of this paper is to investigate the relationship between capital structure and profitability of the limited liability companies from an agricultural sector in the Czech Republic over the past six year period from 2008 to 2013. Data was obtained and processed from the database of enterprises of Albertina and was analyzed by using descriptive statistics, i.e. mean, median, variation range, standard deviation, coefficient of variation, skewness, kurtosis, and correlation analysis to find out the association between the variables. The results of this paper describe a small negative correlation between the debt ratios and profitability ratios.

Open access