Investigating the Effect of Different Methods of Financial Supply on the Profitability Ratios of Companies Accepted in Tehran Stock Exchange

Abstract

One  of the most important stimulating factors that have an accelerating role in achievement the countries to stage of development are capital adequacy and financial supply. To supply required capital, there are different ways. These ways mainly consist of the use of debt, the use of shareholders' capital in the form of common stock, the use of retained earnings, the combination of these methods and etc. Different ways of financial supply have various risks and efficiencies and different economic, accounting, functional, liquidity and profitability variables of the company are markedly changed under the influence of different methods of financial supply. In this study, the influence of different conventional methods of financial supply (retained earnings, common stock and debt) as independent variables on profitability of companies (return on asset, operating profit margin, net profit margin and return on equity) as dependent variables has been examined.  The present study is applicable and descriptive in correlation branches from view points of objective and the nature of method, respectively. Simple random and cluster methods were used for sampling. Thus, at first, the samples were selected among various industries active in Tehran Securities and Exchange using simple random sampling. And then all of the companies in the oil and petrochemical industry during years 2005-2012 were considered as research sample. Test results of the assumptions show that there was a statistically significant relationship between financial supply through retained earnings and the logarithm of return on equity and but a statistically significant relationship was not found between the financial supply of common stock and debt. Also, results showed that a statistically significant relationship exists between financial supply through retained earnings and debt with net profit margin. But a statistically significant relationship was not observed between financial supply through debt, retained earnings and common stock with return on asset and between financial supply through debt, retained earnings and common stock with operational profit margin.

Keywords: Common stock, Debt, Return on equity, Operational profit, net profit of profitability