There are over 50 financial ratios available for industry ratio analysis and some are more important than the others for different industries. Very often we have a situation that a performance seem to be excellent according to one ratio, but poor to another ratio. Therefore, we need to identify the smaller set of ratios to be used for industry financial analysis. The objective of this paper is to examine the use of multivariate statistical methods in financial ratios analysis in order to reduce the number of ratios and to select optimal ones as a base for construction of a synthetic general index. Empirical research covers BiH companies from the construction industry for the period from 2003 to 2012. The study shows that multivariate methods may be a useful tool for analysing the relation between financial ratios, as for reduction of the number of ratios required for assessing industry financial performance.

Abstract This research is designed to examine the relationship between the capital structure and profitability of non-financial firms in Bosnia and Herzegovina during the ten years period, from 2003-2012. The goal is to prove the existence of the relationship between the firm’s capital structure choice and its profitability. The analysis is extended by including the debt structure and differentiating between the types of debt such as the long-term and the short-term ones. Canonical correlation and multiple regression analysis are used. The results of the multivariate canonical correlation analysis provide support to a hypothesis that the capital structure and profitability have statistically significant relationships. Furthermore, the findings provide support that firms develop different patterns of profitability depending on the capital structure choice. We found that an increasing proportion of short-term debt and long-term debt in the overall liability of the firm reduces its profitability.

Abstract: The purpose of this study is to examine two leverage ratios using a sample of non-financial companies in Bosnia and Herzegovina (BiH). It was done by taking into account the joint effect of traditional capital structure determinants and managers' personal values and aspirations. We applied hierarchical regression analysis to determine the contribution of profitability indicators, firm size indicators, assets, growth, networking, managerial strategies, managerial psychology, managerial human capital and earnings volatility to explain the variance in capital structure. The results suggest that companies with less experienced owners/managers and higher firm growth have higher financial leverage ratios. In the analysis of the balance sheet leverage, financial proxies of capital structure seem to be significant in explaining capital structure variance. Therefore, companies with lower profitability, a lower level of fixed assets and higher growth opportunities have higher balance sheet leverage ratios. The findings provide better understanding of theoretical perspectives that can best explain how companies choose their capital structure in the transition economy context. Furthermore, empirical findings should help corporate managers to make optimal capital structure decisions.

This research is designed to examine the relationship between the capital structure and profitability of non-financial firms in Bosnia and Herzegovina during the period of ten years, from 2003-2012. The goal is to prove the existence of the relationship between the firm's capital structure choice and its profitability. The analysis is extended by including the debt structure and differentiating between the types of debt such as the long-term and the short-term ones. The results of the multivariate canonical correlation analysis provide support to a hypothesis that the capital structure and profitability have statistically significant relationships. Furthermore, the findings provide support that firms develop different patterns of profitability depending on the capital structure choice. We found that an increasing proportion of short-term debt and long-term debt in the overall liability of the firm reduces its profitability.

The purpose of this study is to carry out a comprehensive and robust analysis of the determinants of the capital structure of the Federation Bosnia and Herzegovina (FBiH) companies at the industry level. A large number of hypotheses of different classes of theories are tested. Estimating the dynamic panel models using the system of generalized method of moments (GMM) estimator, we captured both cross-sectional and inter-temporal relationships between the leverage in companies and its determinants. The results show that profitability, collateral value of the assets and the risk, measured by earnings volatility, negatively affect company's leverage, while inconsistent results were for the relationship between different proxies for firm's future growth opportunities and leverage, whereby the firm size overall has no relationship with the firm' s leverage. The findings reflect the transitional nature of the FBiH corporate environment.They suggest that some of the insights from modern finance theory of capital structure are applicable in the FBiH in that certain firm-specific factors that are relevant for explaining capital structure in developed economies are also relevant in the FBiH. Overall, the empirical evidence presented in this Study finds it difficult to demonstrate the validity of the trade-off and the pecking order theories as stand-alone models. The Study’s results also point at several unique aspects of financing behavior in developing countries, from which specific implications for further research follow. DOI: 10.5901/mjss.2015.v6n2s5p188