Financial Performance of Firms: Evidence from Pakistan Cement Industry

Journal of Teaching and Education, 05 (01), 81-94, 2016

13 Pages Posted: 12 Aug 2016

See all articles by Farah Naz

Farah Naz

Kinnaird College for Women

Farrukh Ijaz

University of Management and Technology

Faizan Naqvi

University of Management and Technology (UMT), Pakistan

Date Written: June 1, 2016

Abstract

Financial performance principally reflects business sector outcomes and results that shows overall financial health of the sector over a specific period of time. It indicates that how well an entity is utilizing its resources to maximize the shareholders wealth and profitability. Although a complete evaluation of a firm’s financial performance take into account many other different kind of measures but most common performance measurement used in the field of finance and statistical inference is financial ratios. This paper provides a comprehensive study of the financial performance literature with respect to the cement industry of Pakistan. The literature cover studies from the Iran, India and Pakistan but some international evidences are also presented. The financial ratios used for the measurement of financial performance of the cement sector are profitability ratios, asset utilization ratios, leverage ratios, liquidity ratios and cash conversion cycle from the period 2006-2014. Return on Investment (ROI) is taken as predicted variable and five ratio parameters are taken as predictor variables. The research study found that all parameters have positive relationship with the dependent variable except the leverage ratios which has insignificant relationship. This result is also supported by Selvam et al. (2004), whereas Chandrasekaran (1989) and Dhanalakshmi (1994) identified that the external finances is the key significant factor in determining investment in cement industry. To overcome the limitations of the future study, the considered numbers of years need to be increased and other models like MVA, CAPM, and EVA required being tested for the research to analysis other factors that may affect the financial performance.

Keywords: Financial performance, Financial ratios, ROI, Profitability, Regression analysis

Suggested Citation

Naz, Farah and Ijaz, Farrukh and Naqvi, Faizan, Financial Performance of Firms: Evidence from Pakistan Cement Industry (June 1, 2016). Journal of Teaching and Education, 05 (01), 81-94, 2016, Available at SSRN: https://ssrn.com/abstract=2788357

Farah Naz

Kinnaird College for Women ( email )

93 Jail Road
Lahore, PA Punjab 54000
Pakistan
92 3334271951 (Phone)

Farrukh Ijaz (Contact Author)

University of Management and Technology ( email )

C-II
Lahore, Punjab 54770
Pakistan

Faizan Naqvi

University of Management and Technology (UMT), Pakistan ( email )

Johar Town - Phase 1
Lahore, Punjab 54770
Pakistan

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