Profitability Risk and Its Determinants: A Study of Anta Sport

Profitability is assessed relative to costs and expenses, and it is analyzed in comparison to assets to see how effective a company is in deploying assets to generate sales and eventually profits. The term return in the ROA ratio customarily refers to net profit or net income, the amount of earnings from sales after all costs, expenses and taxes. The more assets a company has amassed, the more sales and potentially more profits the company may generate. As economies of scale help lower costs and improve margins, return may grow at a faster rate than assets, ultimately increasing return on assets. Hence, this study attempted to investigate the influence of firm-specific factors and macro-economic factors affecting profitability of Anta Sport manufacturing company in China. This study employs time series regression analysis of Anta Sport manufacturing company in China from 2012 to 2016. The analysis shows that firm-specific factors (operating margin) and macro-economic factor (GDP) influence the profitability of the firms. This study suggest that the firms should manage their account receivable efficiently by establishing clear credit policy and incorporate more corporate governance elements such as transparency, accountability, fairness, and independence in the firms.