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Petra University
Faculty of Business
Accounting Department
The Impact of Total Assets Turnover on Firm Performance
Candidate Name:
Zaid Farahed
Registration number:
201720895
Name of Supervisor:
Dr. Abdul Rahman Al Natour
This study is provided to complete the requirements of graduation
project in accounting.
Summer Semester
2020/2021
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ABSTRACT
The main objective of this study is to investigate the impact of assets turnover on firm performance.
The study population entails all manufacturing firms listed on Amman Stock Exchange (ASE).
The sample entails ten firms that were selected randomly from the population, the sample size has
been selected due to time limitations. The firm performance is measured using ROA, the assets
turnover is measured as the total sales over assets, and the control variable is the firm size. The
analysis is conducted using SPSS, and it shows that there is a postive impact of assets turnover on
the firm performance.It is recomennded to extend the study and add other sectors under the same
varibles.
Keywords: Assets, Performance, Jordan, Stock market.
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Contents
ABSTRACT 2
Chapter One: Introduction 5
Overview 5
Study Problem 6
Study Question 6
Study Importance 7
Research objectives 7
Chapter Two 8
Literature Review 8
Theoretical Background 8
Assets Turn over 8
Firm Performance 9
Past Studies 11
Chapter Three 14
Methodology 14
Introduction 14
Study Population 14
Study Sample 14
Study Hypothesis 16
Study Model 17
Chapter Four 18
Analysis 18
Introduction 18
Descriptive Analysis 18
Regression Analysis 21
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Chapter Five 23
Conclusions and Recommendations 23
Conclusions 23
Recommendations 24
References 25
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Chapter One: Introduction
Overview
One of the essential human requirements is the manufacturing sector, which facilitates the daily
lives of the nations in emerging and developed markets. The tremendous human need for
manufacturing makes enterprises aware of the importance of generating high-quality products with
human welfare that are responsive to community needs and desires and the advancement of modern
technology. This will immediately raise income, output, and performance, affecting the industry’s
development (Delen et al., 2013).
Significant investments in the manufacturing sector and production value in Jordan will almost
probably directly impact manufacturing enterprises’ financial performance, particularly
profitability. The value of Return on Assets (ROA) can be used to determine one of the profit rates.
The higher the return on investment (ROI), the bigger the profits. High or low ROA is influenced
by the number of assets used to invest, where the amount of the company’s total assets can be
caused by various reasons, one of which is the use of assets to pay or repay corporate debts.
Moreover, the Current Ratio measures a company’s capacity to pay its current liabilities with
current assets. The current ratio measures a company’s capacity to pay short-term obligations or
debt that will be due shortly when the total amount is collected (Said & Tumin, 2011). The greater
the current ratio, the better for the company because it indicates that it can pay its current debt with
current assets that are not numerous.
According to research, the current ratio (CR) has a significant positive effect on return on assets,
while research by Khidmat (2014) and Ironman & Purwati, 2020 states that the current ratio (CR)
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has a significant negative effect on return on assets (ROA). However, this assertion contradicts
Yuliarti, & Diyani, 2018, who claim that the current ratio (CR) has no significant negative impact
on return on assets (ROA). The debt-to-equity ratio depicts the debt-to–equity ratio in corporate
finance and demonstrates the ability of the company’s model to meet all of its obligations (Sawir,
2009). The debt to equity ratio (DER) has a strong negative influence on return on assets, according
to a study by Dewi et al. (2018).
The percentage of a company’s revenue to the value of its average total short- and long-term assets
is known as the asset turnover ratio. As a result, the impact of asset turnover on company
performance is investigated in this study. It assesses a company’s ability to produce revenue from
its assets.
Study Problem
For decision-makers such as business analysts, creditors, investors, and financial managers,
evaluating firm performance using financial ratios has been a conventional yet valuable technique.
These studies were undertaken utilizing several financial ratios rather than the absolute amounts
visible on financial statements to generate significant results. Stakeholders can use ratio analysis
to assess a company’s financial health. Comparisons can be conducted between companies within
an industry, between industries, or inside a corporation using these financial ratios. A tool like this
can also be used to compare the relative performance of several companies of various sizes.
Study Question
What is the impact of total assets turnover of firm performance in Jordanian manufacturing firms?
Study Importance
This study has theoretical and practical significance. The theoretical significance is justified as the
study extends the knowledge and reduces the literature gap in this area. Also, the practical
significance is to help the financial managers and accountants in the manufacturing firms in Jordan
