INFLUENCE OF FIRM SIZE ON ITS BUSINESS SUCCESS

Abstract

A firm may use different methods and diverse (non)financial analysis/indicators in order to evaluate its business success. However, one of the most widely applied methods refers to financial analyses that use profitability ratios as the key measures of firm’s overall efficiency and performance. In this research we focused our attention on firm size and evaluated its influence on firm profitability. Other than by the size of a firm, a firm performance is affected by a variety of internal and external variables. Therefore, apart from mere investigating the relationship between firm size and performance, we also explored the impact of some other variables crucial in determining firm profitability. The analysis was conducted for the 2002-2010 period and the results revealed that firm size has a significant positive (although weak) influence on firm profitability. Additionally, results showed that assets turnover and debt ratio also statistically significantly influence firms’ performance while current ratio didn’t prove to be an important explanatory variable of firms’ profitability.

Keywords

• firm size
• manufacturing
• profitability