As per a report of The Economic Times, the Indian automobile industry provides direct and indirect employment to over 19 million people, thereby playing a vital role in the economic growth and development of the nation. However, to survive in the long run, a business needs to maintain its profitability level sufficient for its perpetual existence. Considering the need for profitability, it is equally important to ascertain its determinants. With this objective, this study concerns the determinants of profitability of Indian automobile companies. Based on secondary data, this study considers the financial ratios, including profitability, and performs the panel data regression analysis using secondary data of the selected Indian automobile companies. The financial parameter includes cash earnings–retention ratio (CERR), debt-to-equity ratio (DTR), inventory–turnover ratio (ITR) and price–book value ratio (PBR). All these parameters were found to have a significant impact on profitability. This study concludes that an improvement in CERR, ITR and PBR with a reduction in DTR can improve the profitability of the automobile companies. These findings will fill a gap in the existing literature regarding the financial parameter determinants of profitability.

Profitability, financial parameters, automobile companies, panel data regression analysis

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