Rethinking the balance sheet

Sammanfattning: Abstract Title Rethinking the balance sheet Seminar date 05 June 2015 Course FEKH89, degree project undergraduate level, Business Administration, 15 university credit points, ECTS Authors Victor Estwall, Hugo Oftedal and Andreas Åström Advisor Tore Eriksson Keywords Return on assets, firm performance, corporate finance, regression analysis, balance-sheet compositions Purpose The aim of this study is to investigate what firm specific variables affect return on assets during a time of economic recession. The study also aims to analyze potential differences in these variables between firms in the industrial and technology sector. Methodology The methodology chosen in this study is of a quantitative and deductive nature, adopted to answer the research questions. Two regression models have been formed to show the relationship between the return on assets and the variables, as well as sectorial differences. Theoretical perspectives The theoretical framework of this paper consists of previous research on the variables presented including the main theories on capital structure. Empirical results This paper’s empirical findings are based on historical data from 42 companies in the industrial and technology sector. The data collected covers a period of six years, yielding 252 observations. Conclusions This study finds several significant variables that affect return on assets, both contradicting and building on previous research. The findings underline the importance for companies to locate and follow its value creating core operations during times of economic recession. Further on, firms of the two sectors did show differing effects of variables. The findings also contribute to the existent literature in that it introduces a non-linear effect on all variables, and strengthens the basis for analysis in the paper.