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The Relationship between Solvency Ratios and Profitability Ratios: Analytical Study in Food Industrial Companies listed in Amman Bursa

Author

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  • Abdul Aziz A. Abdul Rahman

    (Department of Finance and Accounting, College of Business Administration, Kingdom University, Kingdom of Bahrain.)

Abstract

This study aims to examine the relationship between solvency ratios and profitability ratios. The study was conducted on the food industrial companies listed in Amman Bursa during the period of 2012-2014. The results revealed no relationship between the following solvency ratios (debt/asset ratio, debt/equity ratio, long-term debt/assets ratio, long-term debt/equity ratio, and interest coverage) and the following profitability ratios (gross profit margin and operating cash flow margin). The results show negative relationship between both ratios of solvency (debt/asset ratio, debt/equity ratio) and the following profitability ratios (operating profit margin [OPM], net profit margin [NPM] and return on assets [ROA]). There are no relationships between the remaining of the solvency ratios (long-term debt ratios/assets, long-term debt ratios/equity, and interest coverage) and the following profitability ratios (OPM, NPM, and ROAs).

Suggested Citation

  • Abdul Aziz A. Abdul Rahman, 2017. "The Relationship between Solvency Ratios and Profitability Ratios: Analytical Study in Food Industrial Companies listed in Amman Bursa," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 86-93.
  • Handle: RePEc:eco:journ1:2017-02-12
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    References listed on IDEAS

    as
    1. Alvaro Aguirre & César Calderón, 2005. "Real Exchange Rate Misalignments and Economic Performance," Working Papers Central Bank of Chile 316, Central Bank of Chile.
    2. De Grauwe, Paul, 1996. "International Money: Postwar Trends and Theories," OUP Catalogue, Oxford University Press, edition 2, number 9780198775133.
    3. Tsurumi, Hiroki & L. Chen, Chyong, 1998. "Testing the Purchasing Power Parity Theory: A Case of the Taiwanese Dollar Exchange Rate," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 232-254.
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    More about this item

    Keywords

    Solvency Ratios; Profitability Ratios; Food Industrial Companies; Amman; Jordan;

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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