The Analysis of the Correlation Between the Sources of Funding, Performance and Risk Exposure of a Company

Mocanu Florina () and Istudor Ileana Iulia ()
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Mocanu Florina: Valahia University of Targoviste
Istudor Ileana Iulia: Valahia University of Targoviste

Ovidius University Annals, Economic Sciences Series, 2015, vol. XV, issue 1, 827-830

Abstract: The main question of this article is: is there any optimal financial structure, such as a combination of debts and equity that allows maximizing the value of economic asset? In order to highlight the impact of indebtedness on the risk and the performance of enterprises, we conducted a survey based on a sample of 32 companies working in the wholesale trade of building materials. Because they were generally small companies, with a relatively low market capitalization, we chose to opt for the appreciation of their performance by using a classic indicator, from the accountancy field, respectively the Return on Equity, while the risk was calculated by using the Debt-toassets ratio. The models that were made, focused on determining if there were or not any relationships between the Debt-to-equity ratio and the Return on Equity, and also the Debt-to-assets ratio, based on econometric methods and on E-views software of statistical analysis.

Keywords: performance; risk; financial structure; cost of capital; Debt-to-equity ratio (search for similar items in EconPapers)
JEL-codes: G32 L25 (search for similar items in EconPapers)
Date: 2015
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