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The Factor Analysis Of The Company Profitability Increasing

Student: Polina Gorbacheva

Supervisor: Irina Khvostova

Faculty: Faculty of Economics

Educational Programme: Economics (Bachelor)

Final Grade: 7

Year of Graduation: 2016

The level of profitability is one of the main financial and economic indicators, which characterizes the efficiency of the company. The profitability analysis helps to identify the key factors influencing profitability. The framework of this study includes only oil and gas sector because this industry is highly remunerative in the economy of the Russian Federation. In addition, due to the lack of a universal model of profitability analysis the analysis of this industry becomes an urgent task. The aim of the study is to determine the factors that might lead to increasing company profitability in the oil and gas industry by factor and regression analyses. We consider the data of five most profitable Russian oil and gas companies (Gazprom, Lukoil, Rosneft, Surgutneftegaz, Tatneft) for the period from 2010 to 2014 and calculated a number of average profitability indicators. The results show that the changes in net profit has a significant effect on ROE and ROA. In addition, for the analysis of profitability of assets has constructed regression model. The sample contains 52 observations for the 11 largest oil and gas companies of the Russian Federation during the study period (2010-2014). As factors influencing the return on assets were selected by the next factors: company size, company age, the proportion of costs to revenues, the pace of revenue growth, financial leverage and coverage ratio. It was revealed that the age of company and level of financial leverage are insignificant in the analysis of profitability of assets, while for other factors there is significant positive correlation with each other. The obtained results can be useful for executives of oil and gas companies when making managerial decisions.

Full text (added May 26, 2016)

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