Empirical Study on the Factors Determining the Company’s Performance – DuPont System
Author:
University Prof. Ion STANCU, Ph. D.; University Prof. Dumitra STANCU, Ph. D.; Alexandru OPROIU, Ph. D. Student
JEL:
G32; D22; L25
DOI:
Keywords:
company`s performance, DuPont system, equity, profit margins, turnover of assets, leverage lever
Abstract:
The company`s performance is the most privileged themes in corporate economic research. Identifying internal factors but also external ones, is particularly useful to find possible ways to increase performance. Of the many definitions of enterprise performance, the authors have decided to return on equity, due to the complexity of this ratio correlated with both quantitative factors (profit margins, tax rates) and qualitative factors (turnover of assets, stocks, receivable, payable and capital structure ratio).\r\nThis analysis is based on the DuPont system identified correlations between the rate of return on equity (ROE), on the one hand, and the determination of its factors: rate margin, turnover ratios and capital structure ratio. For the industry homogeneity analysis, the authors studied the possible correlations on three pharmaceutical companies (“A”, “B” and “C”), listed on the Bucharest Stock Exchange, during 2005, first Quarter - 2012, Quarter IV.\r\nPanel data for all three pharmaceutical companies has revealed only two significant factors in determining quarterly change of ROE, respectively quarterly change in net profit margin and the previous quarterly change in total assets turnover. The coefficient of determination of ROE by two factors, however, is quite low (21%), which leads us to a future research to identify other critical factors for the financial performance of enterprises.\r\n