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Literature Review: Independent Variables Free Cash Flow and Profitability Current Ratio
According to the study by (Parsian, H & Amir, K, 2013) searched on effect of different factors on dividend payout ratio of Tehran stock exchange (TSE) registered companies. Various companies has been selected for research. They used regression panel for testing the hypothesis of f the study. This study provides us evidence and 102 companies has been selected over the time between 2005-2010. This study shows that independent variables free cash flow and profitability current ratio have negative relation with or impact on (dependent variable dividend payout ratio but independent variable have positive relationship with the dividend payout ratio(dependent variable).
According to the study of Onsae (2013) there is low correlation between investment rate and gross domestic product GDP. He hid descriptive survey to check out the relationship between investment and economic growth in Kenya and for the purpose of study he used investment, and GDP values for the period 1993 to 2012. The companies selected which was registered from Kenya National Bureau of Statistics. Data was analyzed by regression method of the annual growth rate in GDP and Investment. In this study investment is an independent variable and GDP is a dependent variable.
(Habib, 2011) has surveyed 7229 companies registered from Australian stock exchange from 1992 to 2005. He studied free cash flow, and stable profitability and opportunities for growth on stock return and test hypothesis for this purpose, he used regression method. Data was analyzed the by multiple regression methods. He realized firms with free cash flows, and high growth opportunities have a very high value price. And free cash flow has positive relationship with the stock return while profitability is short term. In this study free cash flow and profitability is independent variable and stock return is dependent variable.
(Wanja, 2011) determine the relationship between cash level and working capital like inventory, creditors, debtors in Kenyan from small to medium size enterprises (SMEs). The research has based upon survey method. 205 sample was selected population of this study SMEs. Data was analyzed from the regression model the calculated result that higher cash flow unpredictable embrace more cash and provide smooth operation and performance of the company. The independent variable is cash flow and dependent variable is companies performance.
Mango (2010) determined the effect of free cash flow on profitability of commercial banks in Kenya from 2005 to 2009. It explains the how different components of cash flow influence on profitability growth. In this study he verified banks profit determined by the profit after tax which is dependent variable and the components of cash flow (operating, investing and financing) which are independent variables. Regression method used for analyzing the data. The findings of the study specified that profit of commercial banks has been improved during the last five years. And cash flow generate from operating activities skilled the same tendency and same as cash flow (investing and financing) have been increased from last five years. Cash flow generate from the investing, and financing activities have a positive influence of the commercial banks profit while operating cash flow has negative influence.
(Kemboi, 2010) passed a descriptive survey of different firms in the capital market and a firm level data was collected from the period 2000 to 2008. Data were based upon investment equations in which debt, and cash flow were mentioned as descriptive variables. It shows the positive relationship between investment level and debt in both types of firms.
(Ahmed, H & Javid, A. 2019) held a descriptive survey In which they showed the effect of free cash flow on dividend payout of different companies. Data was collected form 320 non-financial firms registered in Karachi stock exchange in Pakistan. This study used the data from last five years 2001 to 2006. Data was analyzed the by multiple regression model and the findings that higher free cash flow has paid high dividends. In this study free cash flow is independent variable and dividend is dependent variable.
According to (ZHI Xiaoqiang, T.P, 2009) this study was held in China it shows the relationship of internal cash flow and investment expenditure, a descriptive survey method used, and data was collected from 55 banks, secondary data was used. He also used regression analysis from SPSS 20.0.It shows the opposite relationship between investment expenditures and internal cash flow between banks in China.
Gregory A, 2005)used a survey method in London and using the data of eight years of listed national companies. 67 firms were selected for this research and determine the relationship of free cash flow and performance of companies. The result shows there was an inverse relationship between free cash flow and performance of UK takeovers national firms. Free cash flow is independent variable and performance of the firms is a dependent variable.
(Opondo, M, 2004) held a study on effect of free cash flow and earnings on corporate performance of commercial banks in Kenya. 43 banks were selected for this research. Descriptive survey method was used and the result of study shows there are no any difference of free cash flow measure of performance that the expense of maintenance cannot be separated properly.
According to (Lang, P. Stulz, M & Walkling, A, 1991) there is a negative relationship between bidder return, and cash flow. 55 sample of US firms was selected for this research and seven year learning was used from 1980 to 1986. For the analysis of data Regression method was used. Cash flow is an independent variable and bidder return is and dependent variable in this research.
A research was conducted by (Ali, Ormal & Ahmad,2018). It is based on effect of free cash flow on profitability of firms. They selected small and medium listed companies of Germany. Regression method used for the analysis, and he found there is a positive relation between free cash flow and profitability of firms. The regression model clarified there in 70. 65% profitability variation (ROA) of firms. Free cash flow is independent variable and profitability are the independent variables.
According to the (Aftab and Ambreen,2016) there is positive relationship between free cash flow and profitability. They realized free cash flow and firm’s size upheld the effect of profitability of firms. They used regression and correlation models. Free cash flow, and size of firm is an independent variable and profitability are dependent variable.
According to (Ojode Christine Akuku,2014) free cash flow have positive effect on profitability. He collected data from Nairobi listed companies, and audit financial reports or financial statement. 31 companies selected for the analysis and secondary method was used and check reliability from SPSS 20.0. Free cash flow is an independent variable and profitability are dependent variable. There is positive correlation between two companies.
According to (Saqib Ali Bhatti,2012) there is positive relationship between free cash flow and profitability. He selected some dependent variable like earning per share, and its measurements which is calculated as net income divided by Common Shares. There was some independent variables gross profit ratio, financial cost, sales volume and other income means other sources of revenue. Data was collected from financial statements of different companies and quantitative method was used and it based on 2010-2014. All the variables have insignificant relationship with the profitability of different firms.
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