Impact of Debt Management on Profitability of Large Non-Financial Firms in Serbia

Abstract

Profitability is substantial for any firm to maintain business and enable long-term sustainability. Firms’ decision on indebtedness and capital structure have influence on potentials for prosperity, growth, and development. This study aims to find a new empirical evidence on the influence of debt (debt ratio and debt to equity ratio) on firm profitability (ROA), with application to 50 non-financial firms with highest revenues in Serbia in 2019 during 2016-2019 using multiple ordinary least squares regression model. After control for size, liquidity and tangibility of assets, the results find statistically significant correlation and negative influence of debt ratio and capital structure on firm profitability.