The effect of leverage and liquidity on profitability of timber trading companies listed in Bursa Malaysia

Tee, Wan Ping (2024) The effect of leverage and liquidity on profitability of timber trading companies listed in Bursa Malaysia. [Project Paper] (Submitted)

Text FPAS 2024 57.pdf Download (1MB)

Abstract

Although numerous studies have been conducted in the past to investigate the relationship between leverage and liquidity on profitability. However, most of these studies are conducted in other sectors but not on Bursa Malaysia-listed wood-based companies. This has evinced that further comprehensive research should be covered to study the relationship between leverage and liquidity on profitability. Thus, the study is to assess how financial leverage and liquidity are associated with the profitability performance of wood-based trading companies in Bursa Malaysia. The specific objective of this study is to determine the impact of financial liquidity and financial leverage on profitability performance. This study applies (≥30%) of the companies’ revenue to timber trading criteria; only ten companies were found to be related to timber trading businesses, and the data were utilised from the financial statements (annual reports) of the ten identified timber trading companies ranging from year 2013 to 2022. Ratio analysis, descriptive statistics, and regression analysis have also been used in the process of data analysis. This study found that both leverage measured by debt-to-equity ratio (DER) and liquidity measured by current ratio (CR) simultaneously have a significant relationship with profitability measured by return-on-assets (ROA). This study has also found that liquidity (CR) has no significant impact on firm’s profitability. On the other hand, leverage (DER) has a significant negative impact on profitability (ROA). As a result, if companies wish to achieve higher profitability and efficiency, it is advisable that financial managers of wood-based timber trading companies adopt a lower DER to fund their operations.

Item Type:	Project Paper
Depositing User:	Ms. ROHANA ALIAS
Date Deposited:	20 May 2024 00:23
Last Modified:	08 Aug 2024 01:21
URI:	http://psaspb.upm.edu.my/id/eprint/1826

Actions (login required)

View Item