What Determines the Profitability of Business Firms in Pakistan

Abstract

ABSTRACT

The purpose of this research is to examine the impact or the relationships between some internal i.e. Debt to equity and Capital adequacy and external factors i.e. Tax rate, Interest rate and inflation rate, on the Profitability of the firm. Top 30 big firm’s data will be analyzed from 2012 to 2017 registered under the Pakistan stock exchange Commission. The panel regression technique, fixed affects and random affect technique is used to find out the impact variables on the Profitability of the firm. It has been stated that any company's long-term survival depends largely on its ability to be profitable. Although maximizing profits is the main goal of all commercial ventures, the factors that influence profitability in emerging nations have received little attention. In this study, the profitability of publicly manufacturing companies in Pakistan is examined.
Determinant of firms’ profitability is important to understand for decision-making process in business entity regarding maximization of profit and competitive advantage over the competitors. Determinant of the firms discloses the risk and reward associated with it in the market. In addition, it helps in building up an organization's sustainability and provides knowledge about the Future. Different types of tests are run to get maximum output from the variables and its impact on the business entity.

Keywords: Debt to equity ratio, Tax rate, Interest rate, inflation rate.