Analysis of the Factors Affecting the Profitability and Risk of Jordanian Industrial Companies: An Empirical Study

The main objective of this study is to analyze the factors affecting the profitability and risk of Jordanian industrial companies. The study uses a sample of 53 companies from the industrial companies listed on the Amman Stock Exchange from 2003 to 2011. This study applies three models; the first model expresses the factors affecting profitability, and study the independent factors as the following: operating decision (assets turnover), equity multiplier, the size of the company's assets in addition to the Industry Index, but profitability is measured by return on equity. The second and third models are to analyze the factors affecting the risk represented by the following independent factors: asset size in addition to financial leverage, but the risk is measured by the standard deviation of return on equity based on financial concept as well as the standard deviation of the stock price based on marketing concept as dependent variables of the model of study. To achieve the objective of the study, a model to measure the relationship between the independent and the dependent variables is built. The results indicate a positive statistically significant correlation between the size of assets , industry index, and the equity multiplier as factors affecting profitability and at different degrees significant levels , while there was no statistically significant relationship between asset turnover and profitability, and as indicated by the results of the study there is a positive statistically significant correlation of total assets and a standard deviation of the stock price as an indicator of risk, but low significant correlation, while there was no statistically significant relationship to the variable financial leverage in equations as well , but there was no statistically significant relationship is of variable total assets with a standard deviation of return on equity. Finally, the study recommends that attention is given to these decisions, which are important strategies in the company and continue to analyze and determine the factors affecting the profitability and risk for the purposes of diagnosis and analysis to take advantage of them to maximize profitability and at the same time try to reduce the risk to a minimum.