Open AccessHow Does Debt Financing Affect Financial Performance? A Study of Transport Companies Listed in Pakistan
Author(s) -
Ulfat Abbas,
Aziz Sohail,
Samina Khan
Publication year - 2020
Publication title -
review of politics and public policy in emerging economies
Language(s) - English
Resource type - Journals
eISSN - 2708-3829
pISSN - 2708-356X
DOI - 10.26710/rope.v2i2.1684
Subject(s) - debt ratio , debt , finance , business , earnings , context (archaeology) , unavailability , earnings per share , external debt , return on assets , financial system , paleontology , profitability index , reliability engineering , biology , engineering
Purpose: The purpose of this paper investigates the impact of debt financing on airline’s (transport) sector performance of Pakistan.
Design/Methodology/Approach: We gathered the data from secondary sources. In this study, we used a data sample of 11 years from 2008-2018 by using companies annual reports. Due to unavailability of data, only 3 transport companies have been taken for analysis. The software which we used in analysis is SPSS (Statistical Package for Social Science).
Findings: The findings of the study suggests that there is opposite relationship between debt financing and financial performance of airlines. Debt is measured from three ratios, short term debt to total assets, long term debt to total assets and total debt to total assets ratio. For the measurement of performance, we used return on assets and earnings per share. We concluded on the basis of findings that the companies should focus on retained earnings which is cheaper source of finance and use less level of debt. As the more level of debt use by the companies, the performance of companies’ decrease.
Implications/Originality/Value: There is only one study is available in Pakistan which used transport sector in Pakistan in debt financing context