The relationship between financial leverage and liquidity, and firms' profitability of the agricultural industry: evidence from Malaysian listed firms / Muhamad Adhwa Zulkipli, Nik Anis Idayu Nik Abdullah and Amrizah Kamaluddin.

Zulkipli, Muhamad Adhwa and Nik Abdullah, Nik Anis Idayu and Kamaluddin, Amrizah (2019) The relationship between financial leverage and liquidity, and firms' profitability of the agricultural industry: evidence from Malaysian listed firms / Muhamad Adhwa Zulkipli, Nik Anis Idayu Nik Abdullah and Amrizah Kamaluddin. Asia-Pacific Management Accounting Journal (APMAJ), 14 (3). pp. 200-217. ISSN 2550-1631

Abstract

This study examined the relationship between financial leverage and liquidity with firms’ profitability of the Malaysian agricultural industry between 2011 to 2015. Additionally, the study attempted to examine the ability of both financial leverage and liquidity in predicting firms’ profitability. Financial ratios of 40 agriculturural firms’ that were listed in the Bursa Malaysia Main Board were taken as the sample. The selected variables for the study were Debt Equity Ratio (DTE), Interest Coverage Ratio (ICR), Proprietary Ratio (PR), Current Ratio (CuR), Quick Ratio (QR) and Cash Ratio (CsR) as the independent variables whilst Return on Capital Employed (ROCE) was the dependent variable. The study discovered that significant relationships exists between both financial leverage and liquidity and firm profitability. In addition, both financial leverage and liquidity are also significant to explain and predict firms profitability. The results confirm the trade-off theory, which suggests that firm profitability would increase as the level of debt increases, but only to an optimal level where any subsequent increment in the firms’ debt level upon reaching its optimal level would result in the contraction of its profitability.

Metadata

Item Type: Article
Creators:
CreatorsID Num. / Email
Zulkipli, Muhamad Adhwaadhwa@bnm.gov.my
Nik Abdullah, Nik Anis Idayunikanis0208@uitm.edu.my
Kamaluddin, Amrizahamrizah@uitm.edu.my
Subjects: H Social Sciences > HD Industries. Land use. Labor > Economic development. Development economics. Economic growth
H Social Sciences > HD Industries. Land use. Labor > Agricultural industries
Divisions: Universiti Teknologi MARA, Shah Alam > Accounting Research Institute (ARI)
Journal or Publication Title: Asia-Pacific Management Accounting Journal (APMAJ)
Journal: UiTM Journal > Asia-Pacific Management Accounting Journal (APMAJ)
ISSN: 2550-1631
Volume: 14
Number: 3
Page Range: pp. 200-217
Item ID: 29160
Uncontrolled Keywords: Financial leverage, Liquidity ratio, Firm’s profitability, Agriculture firms
URI: http://ir.uitm.edu.my/id/eprint/29160

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