ISSN 2394-5125
 

Research Article 


Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia

Anis Ali.

Abstract
A relative and absolute analysis of financial statements measures the financial performance of the
business organization. Relative performance analysis refers to the establishment of the logical relationship
between or among the variables of financial statements while absolute analysis considers only the variables of
financial statements. The horizontal and vertical analysis reveals the success and failure of the business
organizations of a concerned sector. The objectives of this study are to find out the size determinants of the firm
that govern the absolute or relative financial performance and the relationship of a firmís size determinants with
financial performance measures. To know the financial performance and relationship between various
determinants of the size of the business and absolute and relative measurements of business organization,
horizontal and vertical analysis processed. Ratio analysis is the base of financial performance analysis and reveals
the trend of governance of the financial performance of the material sector companies by the determinants of the
size of the business and multiple correlations applied to get co-variability or relationship of absolute and relative
measures. The historical study reveals that there is significant variability in the return on investment and return
on equity of the material sector companies of Saudi Arabia. The absolute analysis reflects that sales revenue, total
assets, debt, and working capital of the material sector companies govern the absolute profits positively and up to
a higher extent. The other absolute measures of financial performance (profit before tax/Zakat, profit after
tax/Zakat) govern by the business determinants positively but not proportionately. The composite absolute and
relative analysis of financial performance measures reveal that there is a negative relationship between the average
sales revenue and the composite profitability of the material sector companies and weakens the long term and
short term paying abilities.The results reveal that sales revenue governs the absolute financial performance
positively while relative performance negatively. The enhancement of sales revenue enhances the absolute
financial measures positively but declines the relative profitability of the material sector companies. The other
absolute determinants of the firmís size enhance the absolute profit of the businesses. The possible factors of
declining the profitability of material sector companies are increased cost of production and administration cost
due to the major ingredients of step cost therein.

Key words: Firm size, Material companies, sales turnover, absolute and relative analysis, financial performance,JEL classification: P27, C43, L25, L65, M41


 
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Pubmed Style

Anis Ali. Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. JCR. 2020; 7(15): 212-220. doi:10.31838/jcr.07.15.27


Web Style

Anis Ali. Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. http://www.jcreview.com/?mno=119316 [Access: June 26, 2020]. doi:10.31838/jcr.07.15.27


AMA (American Medical Association) Style

Anis Ali. Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. JCR. 2020; 7(15): 212-220. doi:10.31838/jcr.07.15.27



Vancouver/ICMJE Style

Anis Ali. Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. JCR. (2020), [cited June 26, 2020]; 7(15): 212-220. doi:10.31838/jcr.07.15.27



Harvard Style

Anis Ali (2020) Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. JCR, 7 (15), 212-220. doi:10.31838/jcr.07.15.27



Turabian Style

Anis Ali. 2020. Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. Journal of Critical Reviews, 7 (15), 212-220. doi:10.31838/jcr.07.15.27



Chicago Style

Anis Ali. "Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia." Journal of Critical Reviews 7 (2020), 212-220. doi:10.31838/jcr.07.15.27



MLA (The Modern Language Association) Style

Anis Ali. "Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia." Journal of Critical Reviews 7.15 (2020), 212-220. Print. doi:10.31838/jcr.07.15.27



APA (American Psychological Association) Style

Anis Ali (2020) Does Size Affect Financial Performance? : Absolute and Relative Analysis of Materials Sector Companies of Saudi Arabia. Journal of Critical Reviews, 7 (15), 212-220. doi:10.31838/jcr.07.15.27