Determinants of Firm's Profitability

The basic purpose of all the business ventures is to generate profit so all the management decisions and process of operations are intended to get profitability. Profitability analysis indicates how a firm is performing and the prime objective of financial management is to maximize firm's profit. There are number of factors related to industry and firm that affect the firm's profitability but literature indicates that firm specific factors have twice effect on profitability as compared to industry factors. The firm related factors such as liquidity, capital structure, inventory and firm size have a strong relationship with the firm's profitability. This book presents empirical evidence regarding some important firm related factors which affect the firm's profitability in developing economies along with some specific models to analyze the strength of association between the important variables and profitability. The analysis revealed that some firm specific factors have a significant and strong relationship with the profitability of the firm.