Determinants of Profitability for Manufacturing Firm through Panel Model

Abstract

The profitability of the firm is a very important factor that determines a firm’s stability. The main purpose of this study is to recognize the determinants of profitability through panel model. The variables are used for determining the profitability are ROE, EPS, total assets, inventory turnover and current asset. The data that is used in this thesis is collected by the authorized website of state bank Pakistan. We took the data of 20 companies of manufacturing sector and collected its data from the year 2006 to 2020 and ratios for further processing and analysis. For the profitability analysis we have used regression fixed effect model, random effect model, huasman test with the help of STATA which helped us to find out the most correct relationship between the variables of the profitability. We have used ROA and EPS to find out relationship between inventory turnover, total asset, and current ratio. The relationship between the total assets is weak positive relationship. The relationship between inventory turnover shows negative relationship whereas the current asset and total assets which indicates the size of the firm has a positive significant relationship with the profitability. This shows the positions of 20 manufacturing firms of Pakistan and results shows that the not in an unstable state as compare to others sector’s firm.