An Exploratory Study on the Impact of the Financial Ratios on Performance of Korean Service Companies in Accordance with Real Estate Dependence as a Major Source of Income

Abstract

The purpose of this paper is to explore and analyze the impact of the financial ratios on the financial performance of two different types of service industries called Group 1 and Group 2. The Group 1 consists of maritime transport, air transport, hotel and car rental industries that depend on real estate as a major source of income, while the Group 2 consists of travel agencies, trading companies and information service businesses that does not depend on real estate as a major source of income. In this paper, 14 representative financial ratios were analyzed and classified into four categories as follows: stability ratios, profitability ratios, growth ratios and activity ratios. The secondary data used have been collected based on KIS-VALUE from 2015 to 2019. A multiple regression model has been used and secondary data has been analyzed based on SPSS 26.0. The analysis result of the factors affecting the financial performance of Group 1 showed that for the stability ratios, the DR was found to have an effect on the ROE and OITS, whereas it has no effect on the ROA and ROS; SER was analyzed to have an effect only on OITS. In terms of growth ratios, OPGR has an effect on ROS and the OITS but not the ROA and ROE; TAGR only has an effect the ROE. For the activity ratios, the TAT only has an effect on the ROA and SET only has an effect on the ROS. The analysis result of the factors affecting the financial performance of Group 2 showed that for the stability ratios, it is found that the DR has an effect on the ROA, ROS and OITS, whereas it did not affect the ROE; SER was found to have an influence only on the ROE. In terms of activity ratios, the TAT and SET were found to have a significant impact on all financial ratios. This study can be used as a measurement to see whether the difference in the asset structure of the service industry will affect the relationship between financial ratios and financial performance. Finally, the implications of these findings are discussed and future research directions are suggested based on the results of this study.