The study of normative levels of indicators for the company’s assets and capital structure

Lkhamdulam Ganbat*, Tsolmon Sodnomdavaa

* Corresponding Author: Lkhamdulam Ganbat 

*School of Engineering and Economics, Mandakh University, Lkhamdulam@mandakh.edu.mn
School of Engineering and Economics, Mandakh University, Tsolmon@mandakh.edu.mn

Digital Object Identifier: 

https://doi.org/10.53468/mifyr.2024.04.03.39

Abstract: One of the primary challenges in analyzing a company’s financial statements is establishing the normative level for financial ratio indicators. However, in our country, there lacks a unified methodology for determining these normative levels based on the business sector and company size. Therefore, the goal of this research is to assess the normative level by using working capital as a representation of the capital structure and the debt ratio as a representation of the capital structure. In our study, we analyzed a total of 2,200 samples of companies listed on the Mongolian Stock Exchange (MSE) between 2009 and 2022. Based on our research findings, the debt ratio and the percentage of working capital exhibit a non-linear relationship with profitability indicators. It is advisable to establish the normative level as a median rather than an average value, as normative levels also vary depending on factors such as company size, industry, and economic growth.

Keywords: Debt ratio, Return on capital, Normative level, Working capital, Joint stock company

Article History: Received 24 August 2024, Received in revised form 26 August 2024, Accepted 27 September 2024

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