DO ACTIVITY RATIOS RELATE TO GROSS PROFIT MARGIN? EVIDENCE FROM COMMUNICATION SECTOR IN BAHRAIN

Abstract

The objective of this study is to determine the relationship between activity ratios, namely Accounts Receivable Turnover, Inventory Turnover, and Total Assets Turnover, and profitability ratios, specifically gross profit margin, among Bahraini communication sector companies that traded on the Bahrain bourse during the study period (2012-2021). The empirical estimations include descriptive analysis, testing for multi-collinearity, and regression analysis. The empirical data supports the existence of a positive link between profitability and total asset turnover, as indicated by the findings. A correlation between Inventory Turnover and Accounts Receivable Turnover and the profitability indicator could not be established. Businesses can utilize the findings of this study to evaluate employee performance and develop financial-based management methods. According to the survey, business leaders should focus on the critical factors of estimating whether a company will generate a profit.