The Relationship between financial leverage and profitability among publicly-listed industrial companies in the Philippines

• Main Authors: Cobarrubias, Arvin Jon B., Pascual, Melissa Angelyn R., Yao, Cybelle Y.
• Format: text
• Language: English
• Published: Animo Repository 2013
• Subjects: Financial leverage > Philippines; Operating leverage; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/10652
• Institution: De La Salle University

This study on the relationship of financial leverage and profitability among publicly listed industrial companies in the Philippines. This study aims to determine whether a relationship between company financial leverage and its profitability actually exists. The determination of such relationship would give rise to new ideas that could help companies in the decision-making process for their potential financing needs. The researchers chose to test the companies degree of financial leverage (DFL), interest cover, and debt-to-equity ratio against three (3) selected profitability ratios, namely return on equity (ROE), economic value added (EVA), and free cash flow (FCF) yield. With a total population of 62 publicly listed industrial companies in the country and a time spa of five (5) years, the researchers used the statistical method of panel regression in order to determine the existence and the degree of relationship among the tested independent and dependent variables. The results showed financial leverage having significant effect on profitability, projecting up to 25.6% degree or percentage of determinability (DFL to EVA).