THE EFFECT OF FINANCIAL RATIOS ON COMPANY PROFITABILITY

Abstract

The study examines Me effect of financial ratios on profitability of manufacturing fins listed at DSE in Tanzania The selected ratios include three activity ratios namely working capital turnover, total as.' turnover and inventory turnover.. solvency ratios whim are debt to equity and debt to total assets and finally one liquidity ratio that is cash conversion cycle Six null hypotheses and six alternative hypotheses were formulated to guide the investigation and the statistical tests of parameter estimates was conduct. using fixed effects regression model The research design was descriptive and quantitative approach was used. Panel data was used on Me secondary .a extracted from annual reports of the companies under study The findings of the study show that debt-to-equity. inventory turnover and cash conversion cycle had significant mega. effect on firm's profitability at DSE while total assert turnover has significant positive influence on firm's profitability The study findings further reveal that working capital turnover and debt to assets have no influence on fins profitability at DSE. The study concludes that firms should not tie up excessive capital so as generate sustainable profits, they should find an optimum level of working capital management that best suits their business operations. The 5.y further concludes that total assets turnover is a dominant factor in improving the firm's profitability. The study further recommends that companies al DSE should improve the cash conversion cycle and the inventory turnover in order to enhance their profitability.