Financial Performance and Identify Affecting Factors in this Performance of Non-oil Manufacturing Companies Listed on Libyan Stock Market (LSM)

Abstract

The major objective of this study to assess the financial performance level and identify affecting factors  in this performance of non oil manufacturing companies listed on Libyan stock market (LSM), for the years from 1999 to 2008. Many previous studies examined the subject of financial performance in the various economic sectors, such as industrial, service, commercial, banking, and tourism from developed and developing countries. Researchers have studied in these subjects on evaluating the financial performance such as Medhat Tarawneh, 2006, Liargovas and Skandalis, 2008, Amalendu Bhunia (2010), Almajali, et al, 2012, and many more. The sample of this study consists of eight companies which were selected based on the criterion of size of the capital.  This study is based on the secondary data obtained from the balance sheets and profit and loss accounts. This study used the financial ratio analysis to measure the level of liquidity, operational efficiency and profitability, while the statistical method used to identify the variables that affect on financial performance. The model of this study consists of nine variables; including the dependent variable is financial performance measured by the return on assets (ROA) and eight  independent variables namely current ratio (CR), quick ratio (QR), net working capital (NWC), inventory turnover ratio (ITR), account receivable turnover ratio (ARTR), general administrative expenses ratio (GAER), company size (CZ) and company age (CG). The data collected was analyzed using financial ratio analysis approach and a number of basic statistical techniques such as descriptive statistics, correlation test (Pearson’s correlation) and regression analysis (Multiple Regression Analysis). the findings of the study, first with regarding of financial ratio analysis approach , the study concluded that there is a high liquidity, this makes these companies have the capacity to meet its financial obligations in the short term, while operational efficiency indicators were unsatisfactory, such inventory turnover ratio and accounts receivable turnover ratio. While regarding the statistical analysis it can be conclude that there are significant relations between liquidity variables and operational activity variables with return on assets as findings suggested that, working capital components and financial performance (ROA) in selected companies disclose both positive and negative association. three variables are negative significant relations with return on assets (ROA namely current ratio (CR), quick ratio (QR) and account receivable (ARTR)) illustrate negative significant relations with return on assets (ROA), while five variables positive significant relations with return on assets (ROA), namely net working capital (NWC), inventory turnover ratio (ITR), general administrative expenses ratio (GAER), company size (CZ) and company age (CG).

Keywords: manufacturing industry, financial performance, financial ratio analysis.