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OCJENA ZADUZENOSTI PODUZECA POKAZATELJIMA PROFITABILNOSTI/USING PROFITABILITY RATIOS TO EVALUATE A FIRM'S INDEBTEDNESS

Zbornik Ekonomskog fakulteta u Zagrebu, 2014-06, Vol.12 (1), p.1

Copyright University of Zagreb, Faculty of Economics and Business 2014 ;ISSN: 1333-8900 ;EISSN: 1845-495X

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  • Title:
    OCJENA ZADUZENOSTI PODUZECA POKAZATELJIMA PROFITABILNOSTI/USING PROFITABILITY RATIOS TO EVALUATE A FIRM'S INDEBTEDNESS
  • Author: Jezovita, Ana ; Zager, Lajos
  • Subjects: Branches ; Capital structure ; Debt financing ; Equity ; Financial leverage ; Interest rates ; Profitability ; Return on assets ; Studies
  • Is Part Of: Zbornik Ekonomskog fakulteta u Zagrebu, 2014-06, Vol.12 (1), p.1
  • Description: When considering a business enterprise in terms of segments that significantly contribute to the realization of long term goals, the analysis of capital structure adequacy and business profitability has an important role. Given analysis can be carried out using financial indebtedness ratios and placing a special emphasis on debt to equity ratio, also known as financial leverage. Profitability analysis, among other things, includes the ability of the company to break even. Capital structure adequacy is evaluated by combining profitability ratios and financial leverage. The key element in assessing the effect of financial leverage is the average interest rate for debt financing. In our research it is defined as the ratio of financial expenses and debt finance (cost of debt). Conducted research determined the relationship between the return on assets, return on equity and cost of debt. If the return on equity is higher than the return on assets, then the cost of debt is less than the return on assets and in that case the company efficiently uses borrowed sources of financing.
  • Publisher: Zagreb: University of Zagreb, Faculty of Economics and Business
  • Language: Croatian
  • Identifier: ISSN: 1333-8900
    EISSN: 1845-495X
  • Source: ProQuest Central
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