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The Effect of Leverage on Profitability of Pharmaceutical Companies

Author

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  • Nicoleta BARBUTA-MISU

    (Dunarea de Jos University of Galati, Romania)

Abstract

The capital structure problem is important and because of the influence of leverage effect on return on equity. This paper aims to study the influence of financial leverage effect on company profitability, using financial data of three large companies from Romania, acting in pharmaceutical sector, in entire production-distribution chain. To carry out this study have been completed three stages: analyses of the profitability of the companies, analyses of the indebtedness and then the effect of leverage on return on equity, using data from 2008-2012 period. The conclusion that emerges in this study is that leverage effect is an important factor that influences the return on equity in function of degree of debts, but not entirely.

Suggested Citation

  • Nicoleta BARBUTA-MISU, 2013. "The Effect of Leverage on Profitability of Pharmaceutical Companies," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 45-52.
  • Handle: RePEc:ddj:fseeai:y:2013:i:1:p:45-52
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    References listed on IDEAS

    as
    1. Olayinka Akinlo & Taiwo Asaolu, 2012. "Profitability And Leverage: Evidence From Nigerian Firms," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 6(1), pages 17-25.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Profitability; Return on assets; Return on equity; Leverage effect; Pharmaceutical sector;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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