The Effect of Selected Financial Ratios on Profitability: An Empirical Analysis of Listed Firms of Cement Sector in Saudi Arabia

Khan, Muhammad Nauman; Khokhar, Imran

doi:10.18488/journal.88/2015.1.1/88.1.1.12

Cited by 11 publications

(12 citation statements)

References 5 publications

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“…Al-Zoubi (2015) conducted a fundamental analysis of Saudi Cement Industry over a period of five years from 2010 to 2014 and found that Operating Profit and Net Profit of the Saudi Cement Companies does not differ significantly. Khan & Khokhar (2015) studied the effect of financial ratios on profitability of listed firms of cement sector in Saudi Arabia over a period of 5 years from 2008 to 2012. Das & Mal (2016) conducted a research on profitability of twelve cement companies in India during a period of ten years from 2001 to 2010.…”

Section: Review Of Literaturementioning

confidence: 99%

Saudi Cement Industry - A Comparative Study of Profitability Position during Economic Slowdown

Husain

Khoja

2021

Int. j. eng. manag. res.

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Infrastructure is one of the favorite projects of every developed and developing nation. Construction industry occupies a prominent place in the infrastructure development of a country. Cement is one the elementary material components in the construction industry. Saudi Arabia has shown a weaker performance in generation of revenue over a period of five years from 2015 to 2019. In a situation of economic slowdown it becomes a challenge for the business concerns to maintain their profitability. The present study is designed to analyze and compare the profitability position of cement companies in the kingdom of Saudi Arabia during this period. The study belongs to top five cement companies in terms of market value and revenue generation in the kingdom of Saudi Arabia. To measure the profitability gross profit ratio, operating ratio, operating profit ratio, net profit ratio and return on investment have been used as variables. One way anova has been used to test the hypotheses. The study shows that these companies do not differ significantly from one another in terms of gross profit, operating profit and net profit but they differ significantly when return on investment is compared. Cement companies can increase their profitability by improving the components of those ratios that have been the cause of decline in profitability.

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Section: Review Of Literaturementioning

confidence: 99%

Saudi Cement Industry - A Comparative Study of Profitability Position during Economic Slowdown

Husain

Khoja

2021

Int. j. eng. manag. res.

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“…The result came that default determinants were Working Capital to Total Assets, Current Ratio, Book value of equity to total liabilities, Total Debt to Total Assets, EBIT to Current Liabilities, and Institutional Ownership (Dewi & Hadri, 2017). Khan and Khokhar (2015) did a research to find out the profitability of listed cement companies of Kingdom of Saudi Arabia (KSA) from 2008-12. The results reveal that Debt to Equity Ratio (Baltaev,#21), Inventory Turnover Ratio (ITR) and Creditors' Velocity (CRSV) have positive relationship with profitability of the companies.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Financial Ratios : A Tool for Computing Probability of Corporate Default

Bajwa¹,

Rashid²

2021

AAR

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Financial institutions want to draw upon a pool of borrowers having a high capacity of making repayments to ensure a smooth lending process. Before lending, financial institutions can assess their prospective customers using various tools such as customer interviews, visits, ratings from external credit rating agencies, financial analysis, and internal ratings along with risk mitigation through securities and collateral, as guided by the regulators and Basel committee. Basel accord suggests an internal rating-based approach where banks are allowed to estimate the borrower’s probability of default, internally. Multivariate statistical approaches such as logistic models is widely used for finding the probability of default models by banks. The current study covers the development of probability of default model after using financial ratios as predictors. Results reveal that financial ratios have a significant impact on the firm’s probability of default, except cash flow ratios. Fitted probability of default model can be utilized in any corporate lending firm for the assessment of its strength and its ability to pay back the loan. Probability of default model meets the State Bank of Pakistan (SBP) and Basel requirements for the implementation of internal rating based approaches in the case of conventional Pakistani banks. Credit risk rating and expected credit losses can be calculated using fitted probability of default model. This study was executed only based on financial ratios because of the availability of financial data only. Conventional banks use managerial, business and economic factors along with financial ratios to construct better predictive models. The current study was conducted on limited data adopted from financial statements analysis published by SBP. The developed model in this study is suitable for all non-financial corporates. Future researchers may develop different models for different industries, for instance, manufacturing and trading.Keywords: financial ratios, default, Basel, internal rating

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“…Direct effects of sectors, as well as financial statements, on stock performance have been extensively studied in literature. See for instance Fama & French (1993); Graham et al (2002); Callen & Segal (2004); Edirisinghe & Zhang (2008); Dimitropoulos & Asteriou (2009); Fama & French (2015); Khan & Khokhar (2015); Enke & Thawornwong (2005); Huang et al (2019). Yet as to be evidently shown by the empirical analysis in section 3.2, the companies' belonging sectors also significantly affect stock returns indirectly through certain financial metrics in the statements.…”

Section: Introductionmentioning

confidence: 96%

Statistical Inference for Linear Mediation Models with High-dimensional Mediators and Application to Studying Stock Reaction to COVID-19 Pandemic

Xu¹,

Li²,

Liu³

et al. 2021

Preprint

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Mediation analysis draws increasing attention in many scientific areas such as genomics, epidemiology and finance. In this paper, we propose new statistical inference procedures for high dimensional mediation models, in which both the outcome model and the mediator model are linear with high dimensional mediators. Traditional procedures for mediation analysis cannot be used to make statistical inference for high dimensional linear mediation models due to high-dimensionality of the mediators. We propose an estimation procedure for the indirect effects of the models via a partial penalized least squares method, and further establish its theoretical properties. We further develop a partial penalized Wald test on the indirect effects, and prove that the proposed test has a χ 2 limiting null distribution. We also propose an F -type test for direct effects and show that the proposed test asymptotically follows a χ 2 -distribution under null hypothesis and a noncentral χ 2 -distribution under local alternatives. Monte Carlo simulations are conducted to examine the finite sample performance of the proposed tests and compare their performance with existing ones. We further apply the newly proposed statistical inference procedures to study stock reaction to COVID-19 pandemic via an empirical analysis of studying the mediation effects of financial metrics that bridge company's sector and stock return.

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The Effect of Selected Financial Ratios on Profitability: An Empirical Analysis of Listed Firms of Cement Sector in Saudi Arabia

Cited by 11 publications

References 5 publications

Saudi Cement Industry - A Comparative Study of Profitability Position during Economic Slowdown

Saudi Cement Industry - A Comparative Study of Profitability Position during Economic Slowdown

Financial Ratios : A Tool for Computing Probability of Corporate Default

Statistical Inference for Linear Mediation Models with High-dimensional Mediators and Application to Studying Stock Reaction to COVID-19 Pandemic

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