Financial Ratios and Profitability - Strategy for Mid-Level Construction Firms: Growth or Value Strategies?
Abstract
Construction firms are in one of the fiercest competitive industries in existence.
These firms, like most businesses, operate towards the primary objective of making
money. Financial strategy is thought to be a critical tool aiding firms in accomplishing
this goal. Structured literature research indicates that the current construction literature
does not address the topic of financial strategy in construction and how this can
potentially impact overall firm profitability. Therefore, this study is intended to fill this
gap and to lay the groundwork for future research on the topic. The aim of this study is
three-fold, first to analyze the statistical correlation between profitability and the
presence of financial strategy. Second formulate a strategic suggestion framework based
on current financial position. Third to fill the industry literature gap regarding financial
strategy.
Using Pearsons correlation and ordinary linear regression analysis, this study
found that no significant correlation existed between the selected profitability metrics
and five financial ratios selected to indirectly indicate the presence of financial strategy.
However, based on a structured literature review and metonymic mapping, a strategic
selection framework was created to suggest a firm’s pursuit of either growth or value
strategy. These statistical analysis and subsequent findings would indicate that a more
direct method of determining the presence of financial strategy within a firm is needed in
order to firmly establish the impact of financial strategy on firm profitability. The
framework created from this study contributes to the construction literature by filling an
apparent gap and establishing a basis from which other studies may evolve.
Subject
ConstructionStrategic Management
Business Strategy
Financial Strategy
Growth Strategy
Value Strategy
Citation
Wheeler, Daniel G (2017). Financial Ratios and Profitability - Strategy for Mid-Level Construction Firms: Growth or Value Strategies?. Master's thesis, Texas A & M University. Available electronically from https : / /hdl .handle .net /1969 .1 /169593.
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