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 models classical values. The sample description of the paper and the corresponding results highlights 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 increasing capitalization rate and less external debt, despite the deteriorating working capital and operating margin. We believe that future research to evaluate Z-score sensitivity under stress test scenarios would be very useful to provide an insight of companies’ insolvency risk amid increasing interest rates and different fiscal tax on dividend.
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, despite the deteriorating working capital and operating margin. We believe that future research to evaluate Z-score sensitivity under stress test scenarios would be very useful to provide an insight into companies’ insolvency risk amid increasing interest rates and different fiscal tax on dividends.
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.
Financial structure is one of the most complex areas of financial decision making due to its interrelationship with other financial decisions variables. Decision related to financial structure is important because it directly affects the profitability of the organization. The purpose of this paper is to empirically examine the impact of capital structure on net profit for all companies active in the wholesale of motor vehicle parts and accessories in Romania (NACE 4531), with extended financial statements over a 10 years period from 2008 to 2017. In this study, the company's financial structure, which is the independent variable, is measured by financial leverage ratio. Net profit ratio (NPR) is used as the dependent variable for the study. Used data has been analyzed by using regression analysis to find out the links between variables. The output of the study may help to the entrepreneurs, board of directors and policy makers to design better decisions in the debt-equity choice.
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