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2012•Ovidius University Annals Economic Sciences SeriesOpen access

The Impact of Financial Leverage to Profitability Study of Companies Listed in Bucharest Stock Exchange

Georgeta Vintilă, Floriniþa Duca

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Abstract

The present study examines the relationship between return on equity (ROE), leverage, size of firms and total assets turnover. A sample companies registered under Bucharest Stock Exchange were examined. The study employed regression method to estimate the impact of debt level on profitability (measured by Return on Equity or ROE). The empirical findings indicate that high debt level causes significant positive impact on ROE. Debt is used by many companies to leverage their capital and profit. However, debt is not the only factors that effect to leverage capital and profit.

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What this paper is about

The present study examines the relationship between return on equity (ROE), leverage, size of firms and total assets turnover. A sample companies registered under Bucharest Stock Exchange were examined. The study employed regression method to estimate the impact of debt level on profitability (measured by Return on Equity or ROE). The empirical findings indicate that high debt level causes significant positive impact on ROE. Debt is used by many companies to leverage their capital and profit. However, debt is not the only factors that effect to leverage capital and profit.

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Available abstract

The present study examines the relationship between return on equity (ROE), leverage, size of firms and total assets turnover. A sample companies registered under Bucharest Stock Exchange were examined. The study employed regression method to estimate the impact of debt level on profitability (measured by Return on Equity or ROE). The empirical findings indicate that high debt level causes significant positive impact on ROE. Debt is used by many companies to leverage their capital and profit. However, debt is not the only factors that effect to leverage capital and profit.

Key concepts: Return on equity, Stock exchange, Profitability index, Debt-to-capital ratio, Business, Debt-to-equity ratio, Leverage (statistics), Debt ratio

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