The Influence and Significance of Financial Ratios on Firm Profitability: Evidence from the Listed Banks on Iraqi Stock Exchange

Abstract

This study aims to assess the impact of the ratios on companies profitability through examination examination of the data from an Iraqi exchange (ISE) sample of banks for the 2007–2015 period. Sample data was analyzed following the multiple regression model and factor analysis, to explore the statistical significance of relationships between firm profitability and the components of financial ratio analysis. Empirical findings of the study indicate that financial ratio analysis variables of Earnings per share (ID), Interest Repetition (IR) and Current Ratio (TR), which are directly related to return on Assets (ROA), have a significantly positive impact on firm profitability of listed banks in ISE. The study also reveals that the Book Value per share (BV), another component of the independent variable, has a significant but negative impact on firm profitability. In addition, the factor analysis further reveals that, relative to the other variables, ID, BV and ROA represents the most important variables applied in this study.