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The Importance of Financial Profitability on the Activity of a Company

Author

Listed:
  • Mircea-Iosif Rus

    (National Institute of Research & Development (INCD URBAN-INCERC), Cluj-Napoca Branch, Romania)

Abstract

The financial rate of return is a financial analysis indicator with an important role in assessing the economic and financial performance of an enterprise. Thus, if the economic rate of return expresses the return on invested capital only from the point of view of the operating activity, the financial rate of return does nothing more than to quantify the return on capital. If we start from the consideration that the financial rate of return expresses the efficiency of the equity capital of an enterprise, we realize that it has a major importance for the shareholders of that enterprise because they can see the effect of the investments made in that enterprise, if these investments are profitable and if they will still be interested in participating in the development of the enterprise, even through new investments. The purpose of the paper is to highlight the importance of financial returns in various situations, as exemplified, and the impact on both the company and the shareholders.

Suggested Citation

  • Mircea-Iosif Rus, 2023. "The Importance of Financial Profitability on the Activity of a Company," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 856-860, December.
    • Handle: RePEc:ovi:oviste:v:xxiii:y:2023:i:2:p:856-860
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    References listed on IDEAS

    as
    1. Constantin Caruntu & Lapadusi Mihaela Loredana, 2009. "Financial return on assets. The impact of the financial return on assets over the company’s development," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 95-108, November.
    2. Florica Brasoveanu, 2023. "The Role of Legislation and Legal Institutions in Promoting Sustainable Development at the Regional Level," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 50-57, August.
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    More about this item

    Keywords

    financial profitability; profit; capital; total assets; income;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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