Open AccessThe Impact of Liquidity and Leverage on Profitability in Industrial Sector in Jordan
Author(s) -
Mousa Mohammad Abdullah Saleh,
Muneer Mohamad Falah Jaradat,
Lu'ay Mohammad Abdel-Rahman Wedyan,
Haneen Mahmoud Ibrahim Saleh
Publication year - 2021
Publication title -
research in world economy
Language(s) - English
Resource type - Journals
eISSN - 1923-399X
pISSN - 1923-3981
DOI - 10.5430/rwe.v12n1p394
Subject(s) - capital structure , market liquidity , stock exchange , profitability index , leverage (statistics) , business , debt ratio , debt , debt to capital ratio , finance , financial system , equity (law) , return on equity , equity ratio , machine learning , computer science , political science , law
Financial leverage is linked to the funding structure in terms of the proportion of debt in the capital structure; the higher the financial leverage is, the more the company depends on debt in its financing structure. On the other hand, the lower the debt is, the more the company relies on equity funding. The company thus decides the optimal funding combination that minimizes the company's capital costs and maximizes shareholder returns.The aim of this analysis was to quantify the effect of the analysis on the profitability of the Jordanian industrial sector listed on the Amman Stock Exchange during the period (2008-2017) and on a sample of (54) industrial companies to assess the impact of leverage and liquidity. In order to evaluate the data obtained from the actual financial statements of the industrial companies listed on the Amman Stock Exchange, a descriptive and systematic methodology was used. As a result, the statistical conclusion showed that the effect of liquidity and leverage on profitability was a significant result.