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Impact of financial structure on Economic Return (ROA – Return on Asset); CASE STUDY: WHOLESALE OF MOTOR VEHICLE PARTS AND ACCESSORIES (NACE: 4531)

by | Jan 14, 2020 | DOI 2018

Rodica Baciu (Boanta), Petre BREZEANU
​The Bucharest University of Economic Studies Department of Finance, Bucharest, Romania
DOI: https://doi.org/10.31410/eraz.2018.237
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4th International Conference – ERAZ 2018 – KNOWLEDGE BASED SUSTAINABLE ECONOMIC DEVELOPMENT, Sofia- Bulgaria, June 7, 2018, CONFERENCE PROCEEDINGS published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia;  Faculty of Business Studies, Mediterranean University – Podgorica, Montenegro; University of National and World Economy – Sofia, Bulgaria; Faculty of Commercial and Business Studies – Celje, Slovenia; Faculty of Applied Management, Economics and Finance – Belgrade, Serbia, ISBN 978-86-80194-12-7

Abstract

The purpose of this research is to determine whether there is a relationship between capital structure and economic performance of firms active in Romania in the wholesale of motors vehicle parts and accessories (NACE 4531). Capital structure refers to how a firm chooses to finance their investments and future growth by dividing debt into subcategories (bank, commercial) and time horizon, while economic performance is evaluated by the return on assets (net result divided by total assets in the balance sheet). By determining this relationship, firms in these sectors should have a better understanding of how to finance long and short term investments to maximize the return on assets and exceed the cost of capital. The main output of the study consists in the fact that the financial structure divided by debt components of the companies explains significantly the return on assets, while the model can be improved by adding operating profits and asset turnover to better explain economic return.

Key words

capital structure, return on assets, operating leverage

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Baciu_BREZEANU_Impact of financial structure on Economic Return (ROA – Return on Asset) CASE STUDY WHOLESALE OF MOTOR VEHICLE PARTS AND ACCESSORIES (NACE – 4531)_pp_237-251Download