Financial leverage and its impact on the profitability rate of companies: An applied study of a number of companies listed on the Amman stock exchange for the period (2019-2022)

Abstract

The study applies financial leverage to a sample of chosen Jordanian companies listed on the Amman Stock Exchange for the (2019–2022) timeframe in order to determine its impact on the profitability rate of companies and showing the extent of that effect, relying on the annual reports of companies in the aforementioned period and extracting the financial leverage represented by the total liabilities on total assets (discussed, analyzed, and described inferentially) and testing the study hypotheses through the use of the E-Views 10 statistical program. The study sample consisted of (12) Jordanian companies. A set of conclusions were reached, the most important of which were: there is an inverse correlation between financial leverage and the profitability rate of the companies in the study sample, and there is also a direct effect between financial leverage and the profitability rate of companies. The study recommends the necessity of directing companies to follow methods to increase the size of liabilities in relation to the company’s assets, which will lead to an increase in the profitability rate of the companies sampled by the study.