Financial structure decisions have strategic role on owners’ welfare and also on survival of companies. Every company is supposed to maintain its optimum capital structure, although its measurement is very difficult. Based on secondary data the study intends to analyze and compare the impact of financial leverage on cash flow ratio of Multinational Companies (MNCs) and domestic companies listed on the Dhaka Stock Exchange (DSE) over a period of 20 years starting from 1996 to 2015. A total of 14 companies consisting of seven MNCs and equal number domestic companies were selected as sample from six industrial sectors. The explained variable of the study was Cash flow ratio (CFR), whereas the explanatory variables were indicators of financial leverage such as: Debt to assets ratio (TD/TA), Debt to equity ratio (TD/SE) and Debt to capital employed ratio (TD/CE). The study has found that Debt to asset ratio is positively related but Debt to equity ratio is negatively related with CFR in domestic companies. A mere 1% increase in Debt to asset ratio and Debt to equity ratio result in 0.501% increase and 0.03% decrease of CFR respectively. In MNCs, unlike domestic companies, Debt to asset ratio is negatively related, whereas Debt to equity ratio is positively related with CFR. For 1% increase of Debt to equity ratio, CFR decrease by 1.5% and vice-versa. On the other hand, for 1% increase in Debt to equity ratio, CFR increases by 0.0039% and vice-versa. The study concludes that financial leverage ratios have significant influence on cash flows of domestic companies but not on cash flows of MNCs in Bangladesh.
| Published in | Journal of Finance and Accounting (Volume 5, Issue 5) |
| DOI | 10.11648/j.jfa.20170505.11 |
| Page(s) | 177-184 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2017. Published by Science Publishing Group |
Capital Structure, Leverage, Equity, Cash Flow Ratio
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APA Style
Syed Mohammad Khaled Rahman, Md. Tahidur Rahman. (2017). Impact of Financial Leverage on Cash Flow Ratio: A Comparative Study Between MNCs and Domestic Companies Listed on DSE. Journal of Finance and Accounting, 5(5), 177-184. https://doi.org/10.11648/j.jfa.20170505.11
ACS Style
Syed Mohammad Khaled Rahman; Md. Tahidur Rahman. Impact of Financial Leverage on Cash Flow Ratio: A Comparative Study Between MNCs and Domestic Companies Listed on DSE. J. Finance Account. 2017, 5(5), 177-184. doi: 10.11648/j.jfa.20170505.11
AMA Style
Syed Mohammad Khaled Rahman, Md. Tahidur Rahman. Impact of Financial Leverage on Cash Flow Ratio: A Comparative Study Between MNCs and Domestic Companies Listed on DSE. J Finance Account. 2017;5(5):177-184. doi: 10.11648/j.jfa.20170505.11
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Download@article{10.11648/j.jfa.20170505.11,
author = {Syed Mohammad Khaled Rahman and Md. Tahidur Rahman},
title = {Impact of Financial Leverage on Cash Flow Ratio: A Comparative Study Between MNCs and Domestic Companies Listed on DSE},
journal = {Journal of Finance and Accounting},
volume = {5},
number = {5},
pages = {177-184},
doi = {10.11648/j.jfa.20170505.11},
url = {https://doi.org/10.11648/j.jfa.20170505.11},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20170505.11},
abstract = {Financial structure decisions have strategic role on owners’ welfare and also on survival of companies. Every company is supposed to maintain its optimum capital structure, although its measurement is very difficult. Based on secondary data the study intends to analyze and compare the impact of financial leverage on cash flow ratio of Multinational Companies (MNCs) and domestic companies listed on the Dhaka Stock Exchange (DSE) over a period of 20 years starting from 1996 to 2015. A total of 14 companies consisting of seven MNCs and equal number domestic companies were selected as sample from six industrial sectors. The explained variable of the study was Cash flow ratio (CFR), whereas the explanatory variables were indicators of financial leverage such as: Debt to assets ratio (TD/TA), Debt to equity ratio (TD/SE) and Debt to capital employed ratio (TD/CE). The study has found that Debt to asset ratio is positively related but Debt to equity ratio is negatively related with CFR in domestic companies. A mere 1% increase in Debt to asset ratio and Debt to equity ratio result in 0.501% increase and 0.03% decrease of CFR respectively. In MNCs, unlike domestic companies, Debt to asset ratio is negatively related, whereas Debt to equity ratio is positively related with CFR. For 1% increase of Debt to equity ratio, CFR decrease by 1.5% and vice-versa. On the other hand, for 1% increase in Debt to equity ratio, CFR increases by 0.0039% and vice-versa. The study concludes that financial leverage ratios have significant influence on cash flows of domestic companies but not on cash flows of MNCs in Bangladesh.},
year = {2017}
}
TY - JOUR T1 - Impact of Financial Leverage on Cash Flow Ratio: A Comparative Study Between MNCs and Domestic Companies Listed on DSE AU - Syed Mohammad Khaled Rahman AU - Md. Tahidur Rahman Y1 - 2017/10/16 PY - 2017 N1 - https://doi.org/10.11648/j.jfa.20170505.11 DO - 10.11648/j.jfa.20170505.11 T2 - Journal of Finance and Accounting JF - Journal of Finance and Accounting JO - Journal of Finance and Accounting SP - 177 EP - 184 PB - Science Publishing Group SN - 2330-7323 UR - https://doi.org/10.11648/j.jfa.20170505.11 AB - Financial structure decisions have strategic role on owners’ welfare and also on survival of companies. Every company is supposed to maintain its optimum capital structure, although its measurement is very difficult. Based on secondary data the study intends to analyze and compare the impact of financial leverage on cash flow ratio of Multinational Companies (MNCs) and domestic companies listed on the Dhaka Stock Exchange (DSE) over a period of 20 years starting from 1996 to 2015. A total of 14 companies consisting of seven MNCs and equal number domestic companies were selected as sample from six industrial sectors. The explained variable of the study was Cash flow ratio (CFR), whereas the explanatory variables were indicators of financial leverage such as: Debt to assets ratio (TD/TA), Debt to equity ratio (TD/SE) and Debt to capital employed ratio (TD/CE). The study has found that Debt to asset ratio is positively related but Debt to equity ratio is negatively related with CFR in domestic companies. A mere 1% increase in Debt to asset ratio and Debt to equity ratio result in 0.501% increase and 0.03% decrease of CFR respectively. In MNCs, unlike domestic companies, Debt to asset ratio is negatively related, whereas Debt to equity ratio is positively related with CFR. For 1% increase of Debt to equity ratio, CFR decrease by 1.5% and vice-versa. On the other hand, for 1% increase in Debt to equity ratio, CFR increases by 0.0039% and vice-versa. The study concludes that financial leverage ratios have significant influence on cash flows of domestic companies but not on cash flows of MNCs in Bangladesh. VL - 5 IS - 5 ER -
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