Indebtedness of Enterprises and Profitability Improvement

Abstract

This paper presents an analysis of the efficiency of the indebtedness of companies in the Republic of Serbia. In order to investigate whether the companies’ borrowing is accompanied by the efficient investment of resources and the achievement of better profitability, the correlation analysis of level of indebtedness and profitability was conducted. The research was based on a sample of 42,057 observations of companies that operated in the Republic of Serbia in the period 2009-2013. The research results indicate that the debt is negatively correlated with the level of profitability, which shows a weak ability of companies to improve their performance through additional debt.