Analyzing The Indicators of Financial Flexibility of Companies and Their Impact on Financial Performance
Analytical study of a sample of Iraqi industrial companies
listed on the Iraq Stock Exchange for the period (2005-2019)
Thesis submitted to the Board of the College of Administration and Economics / University of Kerbala, which is part of the requirements for obtaining a master’s degree in financial and banking sciences
Swbmitted by
Saif Al-Deen Ahmed Awad Al-Asadi
Supervisor by
A. P. Dr. Ali Ahmed Faris Al Kaabi
Abstract
Socio-economic changes in the last three decades have increased companies’ need for flexibility in their financial and administrative systems. As a result of the rapid progress in management and business, it has resulted in a turbulent business environment, which shows that it is unknown and complex. Faced with this situation requires companies that wish to remain within this environment to be more flexible in their organizational and financial structure as well as their human resources, especially in a rapidly evolving world of increasing global competition.
The study aimed to measure and analyze the impact of financial flexibility on financial performance, by using a sample of (5) industrial companies listed in the Iraqi Stock Exchange, which were selected based on the availability of study data for a period of (15) years (2005-2019). In addition, the study used a set of analyzes and statistical tests through the financial and statistical programs (EXCEL) and (SPSSV.22), using the multiple regression coefficient and the method of backward elimination.
The study used two independent variables, one of which is financial flexibility, and it included a set of indicators represented by financial leverage (liquidity represented by the circulation ratio, the equity multiplier) and cash holding represented by the cash ratio and net cash flow, However the dependent variable is the financial performance measured by profitabilty (return on assets, Return on equity, net profit margin), and efficiency indicators (asset turnover, fixed asset turnover, inventory turnover(.
The study reached a set of results, the most important of which is (there is a direct and statistically significant relationship of financial resilience indicators with most financial performance indicators), where the statistical results indicate that the hypotheses had a significant impact with most financial performance indicators for all companies (National, Baghdad, Al-Kindi, Iraqi, Sewing) with the exception of some cases due to the absence of a significant effect.
The study recommended that companies take into account these variables by applying financial resilience indicators, in particular (trading ratio, equity multiplier), cash ratio and net cash flow on financial performance indicators as they are able to respond effectively to unexpected shocks to the company, avoiding the risk of bankruptcy, facing financial obligations and creating opportunities investment.
