Analiza finansowa dźwigni finansowej i rentowności: dowody z chorwackich małych i średnich przedsiębiorstw
Financial accounting analysis of leverage and profitability: Evidence from Croatian SMEs

Summary/Abstract: Purpose: This paper explores the role of financial accounting and reporting in under-standing SMEs’ indebtedness and its impact on profitability. The paper reviews prior accounting-based research, analyzes the level of debt among Croatian SMEs, examines their use of leverage to enhance profitability, and quantifies its contribution relative to other factors. Methodology/approach: The analysis covers 3,094 Croatian manufacturing companies for 2020–2024. Data from financial statements were used to calculate key financial ratios: ROE, ROA, net profit margin (NPM), total assets turnover (TAT), debt ratio (DR), and financial leverage index (FLI). The methodology included descriptive statistics, Pearson and Spearman correlation, and OLS regression analysis. Findings: On average, companies finance about half of their assets with debt, with small companies showing the highest levels of indebtedness. Most companies achieve positive leverage effects, but the relationship between company size and FLI is neither linear nor monotonic. Regression analysis indicated that, although DR has a positive impact on ROE, operational efficiency, as measured by NPM and TAT, has a larger and more dominant impact on profitability across all company groups. Research limitations/implications: The research is limited to one industry, a specific period, and accounting data from financial statements. The findings indicate that companies, especially SMEs, should primarily focus on improving operational efficiency to maximize ROE. Originality/value: This paper provides new insights by connecting financial accounting concepts of leverage and profitability, with a focus on SMEs, which are often studied separately or without considering their unique reporting characteristics. Such analysis can help SMEs make informed financial decisions.

• Details
• Contents