The Relationship Between Financial Leverage and Profitability Indicators Analytical Study: for a Sample of Iraqi Industrial Companies for the Period From 2014-2018))

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The Relationship Between Financial Leverage and Profitability Indicators Analytical Study: for a Sample of Iraqi Industrial Companies for the Period From 2014-2018))

Saad Majeed Al-Janabi1*

*Al-Muthanna University / College of Administration and Economics / Department of Business

ABSTRACT

This study aims to know the relationship between financial leverage tools and profitability indicators, as the industrial sector firms listed in the Iraqi Stock Exchange were selected as one of the most important sectors as a society for the study, and a sample of this community consisting of 10 firms was selected for the period from (2014-2018)  , The problem of the study centered on the fact that most firms suffer from a high cost of capital as a result of the lack of prior planning to develop an optimal financial structure commensurate with their financial capabilities, which the company can use to use the debt and equity ratio that the company achieves a rate of return that exceeds the cost of sources of funds and with less risks Then, a theoretical and cognitive mattress was presented about the variables of the study, and the descriptive analytical method was used to analyze the data for those variables to reach a set of results by testing the hypotheses of the study whether they were accepted or not. The statistical programs (SPSS-25) and (Excel) were used to analyze the relationship between independent variables (financial leverage) and dependent variables (profitability indicators), as multiple regression was used to test the impact relationship between variables, and the study reached a set of conclusions, the most important of which are Financial leverage has a positive effect if the rate of return for profitability indicators (return on investment, return on equity and revenue power) is higher than the cost of debt for investments that were financed by debt and vice versa. Financial for the purpose of benefiting from tax savings and achieving returns higher than the cost of debt to achieve the optimal financial structure.

Keywords: financial leverage, profitability indicators

Muthanna Journal of Administrative and Economic Sciences, 2022,Volume 12, Issue 4, Pages 142-157

DOI: 10.52113/6/2022-12-4/142-157

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