Vol 2, No 4 (2014)
Profitability Assessment of Latvian Companies: Emphasis on ROE
Elvira Zelgalve, Ilze Sproge, Irina Berzkalne
Abstract
This paper examines the financial position of Latvian companies. The data set consists of 450 non-listed companies in Latvia over the period from 2004 to 2012 and covers three industries – agriculture, food production and retail. This study puts emphasis on profitability and in particular on return on equity (ROE). Firstly, the authors discuss the theoretical aspects of the return on equity. In the second step, empirical analysis of profitability is done by using correlation and regression analyses. Finally, the paper concludes with the summary and recommendations. Results show that the main driver of the increase in ROE in 2011 and 2012, compared to 2010, is the return on sales, which has become positive from negative. It means that companies were able to add a larger premium to the price of products. These trends have to be viewed in positive light since the increase in ROE has not happened due to borrowing but instead due to improvements in profitability and activity.
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Keywords
DuPont Analysis; Profitability; Return on equity; Return on sales; Return on assets
Publication information
Volume 2, Issue 4
Year of Publication: 2014
ISSN: 1857 - 8721
Publisher: EDNOTERA
How to cite
Zelgalve, E., Sproge, I., Berzkalne, I. (2014). Profitability Assessment of Latvian Companies: Emphasis on ROE. Journal of Applied Economics and Business, Vol 2, No. 4, 45-58.