Page |1

Independent University, Bangladesh (IUB)

Course Title - Business Research Methods

Course ID- BUS485
Section- 06
Semester- Autumn 2022
Submission Date: December 3rd ,2022

Submitted to -
Dr. Maqbool Kader Quraishi
Assistant Professor
School of Business and Entrepreneurship

Submitted by

Team Deal Maker

Name ID

NILA AKTHER 1930025

FAHIM TANVIR 1930443

ANKAN DAS DIP 1930716

TASSIN AHAMRD LABIB 1830990

 Page |2

MARIA MAHEED 1921761

Table of Contents
Abstract .............................................................................................................................................4
Introduction ......................................................................................................................................4
Literature Review ..............................................................................................................................6
Preview Empirical Studies: ..............................................................................................................6
Variables ........................................................................................................................................8
Selection of variables and formation of Hypothesis.............................................................................8
Working Capital .............................................................................................................................8
Firm Leverage .............................................................................................................................. 10
Liquidity ....................................................................................................................................... 11
Productivity ................................................................................................................................. 11
Profitability .................................................................................................................................. 12
The Data, Sample & Model Specifications ......................................................................................... 13
Data Description .......................................................................................................................... 13
The Sample Collection ...................................................................................................................... 15
Data Findings and Analysis ............................................................................................................... 17
Descriptive statistics analysis ........................................................................................................ 17
1.EFFICIENCY ................................................................................................................................ 18
2.LEVERAGE ................................................................................................................................. 18
3. LIQUIDITY ................................................................................................................................. 19
4. PRODUCTIVITY ......................................................................................................................... 19
5. PROFIBILITY .............................................................................................................................. 19
6. WORKING CAPITAL ................................................................................................................... 19
Correlation Analysis ......................................................................................................................... 19
Correlation between: Asset Turnover Ratio and Total Depth Ratio ................................................ 21
Correlation between: Asset Turnover Ratio and Current Ratio ...................................................... 21
Correlation between: Asset Turnover Ratio and Fixed Asset Turnover .......................................... 21
Correlation between: Asset Turnover Ratio and Return on Equity ................................................. 21
Correlation between: Asset Turnover Ratio and Current Asset – Current Liability .......................... 21
Discussion of results......................................................................................................................... 21
 Page |3

Working Capital ........................................................................................................................... 22

Leverage ...................................................................................................................................... 23
Liquidity ....................................................................................................................................... 23
Productivity ................................................................................................................................. 23
Probability ................................................................................................................................... 24
Conclusion, limitations, and application ........................................................................................... 24
Reference: ....................................................................................................................................... 25
 Page |4

Abstract
Purpose - In this paper we have conducted an analysis of financial ratios of companies in an
industry with its efficiency. We have chosen five financial ratios that have a significant impact in
Bangladeshi Life Insurance industry and the ratios are – working capital, leverage, liquidity,
productivity, and profitability. The purpose of this research paper is to find out the efficiency of
their operation level.
Methodology - The study was conducted on 10 listed Life Insurance companies in Bangladesh and
the data relevant to the study were extracted from the companies’ annual reports. We have
chosen the year 2015-2021 as our research period. To examine the relationships between the
variables, we have used the E-Views software.
Findings- The outcomes we have got from this study show that working capital, Liquidity and
productivity have a negative but not significant relationship with efficiency ratio, whereas
probability and leverage have a positive effect on efficiency.
Practical implications - The result from this study includes some of the biggest Life Insurance
industry companies in Bangladesh but we have taken only 10 companies so it might not help much
in a bigger aspect of the industry as it will have more variation when a bigger sample is chosen.
But it can give us some idea about the relationship of the industry’s financial ratios and efficiency.
Originality - This study is a completely new one, because no other study has been done solely on
the Life Insurance industry’s efficiency, especially in Bangladesh. More than that, the study covers
a 7-year period between 2015-2021, which shows a greater variations and lesser skew.
Keywords - Working capital, Leverage, Liquidity, Productivity, Profitability, Efficiency,
Bangladeshi Life Insurance industry

Introduction
Here we are working on 10 LIFE INSURANCE companies (National Life Insurance Company
Ltd. Pragati Life Insurance Ltd. Sonali Life Insurance Ltd. Delta Life Insurance Ltd. Popular Life
Insurance Ltd. Prime Islami Life Insurance Ltd, Rupali Life Insurance Ltd, Meghna Life Insurance
Ltd, Fareast Islami Life Insurance Ltd, Sondhani Life Insurance Company Ltd.). Our study gives
more consideration to efficiency in those 10 companies and its relationship with other financial
ratios that measure several variables. We have taken 5 variables in our considerations. Those are
 Page |5

working capital, profitability, productivity, liquidity & leverage. For Life Insurance Companies
Profit is the most important driving factor. And it does not come on its own. It takes several other
factors for a company to have their desirable profit. As important as it is to achieve profit through
price and cost control, companies are increasingly concerned with other factors contributing profit.
At recent times, efficiency has peeked in the most talked about topic of corporate world. It is no
secret that financial ratios (Jose H. Ablanedo Rosas, 2010) such as liquidity (Rashid, Efficiency of
Financial Ratios Analysis for Evaluating Companies’ Liquidity, 2018), profitability (Barr et al.,
2002); operating (Dwi Martani, 2009), asset turnover (Warrad, 2015), leverage (Weill, 2003),
turnover (JEFFREY A. ALEXANDER PH.D., 1994), cashflow (Fusheng Wang, 2015) along with
profitability (Mimis, 2013), have a strong relationship with efficiency. While some industries have
a very strong relationship with some of these, others can have a rather different views on efficiency.
There has been a few research by scholars on the importance of efficiency & its relationship with
the financial ratios for different industries such as education, engineering, food, textile, oil,
pharmaceuticals, banking and so on. Although, financial ratios do not necessarily contribute only
towards efficiency but a lot of business capabilities and decisions. The Life Insurance industry is
particularly in Bangladesh, is emerging and highly competitive. In achieving economic stability,
Life Insurance Ltd is important. As this sector has massive magnification effects on the economy's
activity and provides 0.49% of GDP, it is a significant driver of economic growth. Through linking
industries such MS bar, cement, brick, sand, ceramic tile, paint, and other fixtures and fittings, the
industry also contributed to the national economy. According to data Market value for the Life
Insurance company in Bangladesh is 9,020 crore BDT up by 10.10% from Tk8,199 crore while
premium of non-life insurance stood at Tk3,397 crore, up by 13.92% from Tk2,981 crore.

The motive of our study is to differentiate the pandemic effect on Life Insurance industry &
analyses of financial ratios in line with the internal and external environment. To be more precise,
academic research about the Life Insurance industry of Bangladesh is merely a rare concept and
working on measuring the efficiency of such industry against financial ratios is also an exception.
Therefore, this research aims at analyzing the relationship between five different variables and
efficiency ratio in 10 different Life Insurance companies in Bangladesh. These variables are
working capital- measured by current asset minus current liability.
leverage- measured by degree of operating and financial leverage.
 Page |6

liquidity- measured by current asset and quick ratio.

productivity- calculated by output(revenue) to input (fixed asset) ratio and
profitability measured by return on asset, return on equity and operating profit ratio.
In short, this study intends to achieve the following objectives:

(1) To analyze the relationship between working capital and firm efficiency.
(2) To analyze the relationship between leverage and firm efficiency.
(3) To analyze the relationship between firm liquidity and firm efficiency.
(4) To analyze the relationship between firm productivity and firm efficiency.
(5) To analyze the relationship between firm profitability and firm efficiency.

Since there has not been any extensive research aiming to solve the post covid efficiency issue in
Life Insurance industry, this research will provide a guideline to all those managers struggling to
recover from the unexpected event. As Insurance penetration in Bangladesh in GDP percentage
declined to 0.40% in 2020, from 0.49% a year ago, according to a recent sigma report. This will
help the managers to identify their company’s lacking and efficiency status hence giving them a
path towards improvement to sustain in this competitive industry. The remainder of this paper is
organized as follows: literature review followed by methodology and developing hypothesis, the
next section analyzes the research findings and finally ending with the study conclusion.

Literature Review
Preview Empirical Studies:
Efficiency represents the maximum level of performance that can be achieved using the minimum
number of inputs to produce as much output as possible. It is a concept that can be quantified.
Calculated by dividing the available output by the total input. On the other hand, the ability to
achieve the end goal of little or no waste, effort, or energy is called efficiency. Simply put,
something is efficient if you don't waste resources and optimize every process. For example,
money. Examples are human capital, production equipment and energy sources (Bieniasz, 2012).
Similarly, if companies want to achieve sustainability and competitive advantage in the market,
especially in a resource-constrained world with a rapidly growing population, it is imperative that
companies strive to operate more efficiently. will be Efficiency is therefore of great importance
for companies to improve and maintain market performance and remain competitive.
 Page |7

A significant connection lies between the efficiency in Life Insurance industry and firm’s ratios.
This paper, however, is concerned with the efficiency of companies in Bangladesh and chooses
the most common financial ratios to check whether there are significant associations
between these financial ratios and efficiency in Bangladeshi Life Insurance companies.
However, because all inputs are limited, efficiency is a critical quality. Time, money, and raw
materials are all finite resources, so it's critical to conserve them while maintaining a reasonable
output level. An efficient society is better able to serve its citizens and function competitively.
The following formula may be used to describe efficiency as a ratio: output to input. The total
quantity of beneficial work accomplished, excluding waste and spoilage, is known as output, or
work output. On the other hand, by multiplying the ratio by 100, we may represent efficiency as
a percentage. Organizations' resources are precious, difficult to replicate, uncommon, and
cannot be substituted, according to resource-based theory, hence they should be used efficiently
to gain a competitive advantage. As a result, efficiency is critical for businesses to improve them
market performance, stay competitive, and be less sensitive to outside competition. According
to (Opler, 2014), companies with low operational efficiency have a greater failure rate. According
to (Fusheng Wang, 2015) when firms conduct their businesses efficiently, they may have greater
market shares as well as better profits due to their lower production costs; as a result, the needed
rate of return is lower for inefficiently functioning enterprises. Various ratios may be used to assess
efficiency, but many academic studies agree that total asset turnover relates to the efficiency that
shows how much a company uses its assets to create revenue.
There is currently much concern about the value of resource efficiency in the Life Insurance
industry.
 Page |8

Variables

Dependent Variable Independent Variable

Firm Efficiency Working Capital
Firm Efficiency Leverage
Firm Efficiency Liquidity
Firm Efficiency Productivity
Firm Efficiency Profitability

Selection of variables and formation of Hypothesis

Working Capital
Working capital is a balance between generating value and maintaining liquidity.
Ensures that a company operates efficiently by using its current assets and liabilities. Working
capital can be positive or can be negative, positive working capital measures a strong indicator
for company’s short term financial health. And, it indicates that it has enough liquid assets to
survive short-term debt, when the value is low it means the company need to borrow money
from bank or somewhere else. Negative working capital indicates that assets are being unused, and
a firm facing a financial problem if a firm has a good amount of fixed assets, it will face financial
problems. Working capital management requires monitoring a company's assets and liabilities to
maintain sufficient cash flow to meet its short-term operating costs and short-term debt obligations.
Working capital management can improve a company's earnings and profitability through efficient
use of its resources. Working capital management entails keeping track of three ratios: working
capital ratio, collection ratio, and inventory ratio.
The WCM is basically tries to tell that to guarantee that the company has adequate cash flow to
cover its short-term operating costs and debt. A current asset is something that can be converted
into cash in less than a year. These are the company's highly liquid assets. Current assets include
cash, accounts receivable, inventories, and short-term investments. Current obligations are any
commitments that are due within the next 12 months. Among them are operating expenses and
long-term debt payments. (Sachdeva, K., 2020. Relationship between Working Capital
Management and Profitability of the Life Insurance industry Sector in India: Evidence from Panel
Data Analysis.) studied the working capital management efficiency in Life Insurance industry. The
assessment criteria were inventory, accounts receivables, current liabilities, turnover cycles, cash
conversion cycle, and rates of return from non-financial assets. The research proved that the
 Page |9

shortest the working capital cycles, the higher the rates of profitability and efficiency. There’s an
impact of decreasing working capital cycle on improved productivity. Thus, there’s a negative
relationship between working capital and efficiency. They say the level of current asset should be
optimized and this optimization has to come from the sources of financing as well. A method of
linear regression applied by these authors showed a statistically significant and negative
relationship between the profitability ratios and the length of cycles, except for the current
liabilities cycle. There was another research by (Gołaś*, 2020), who found a positive relationship
between the cash conversion cycle and a return on invested capital, although this relationship was
vague. Their analysis shows a high inventory cycle, accounts receivable cycle, current liabilities
cycle, and cash conversion cycle have a negative impact on ROA. Prolonging the inventory and
current liabilities cycles negatively influenced the profitability. The profitability was negatively
correlated with the cycles of inventory, accounts receivables and current liabilities.

According to the paper studied by Sachdeva, K., 2020. Relationship between Working Capital
Management and Profitability of the Life Insurance industry Sector in India: Evidence from Panel
Data Analysis.), the impact of working capital management on return on asset thus on the
efficiency in Life Insurance industry. The assessment criteria were Days Sales of Inventory (DSI),
Days Sales Outstanding (DSO), Days Payable Outstanding (DPO) and the Cash Conversion Cycle
(CCC). Their findings from other research have also seen a negative relationship with working
capital and profitability. They have, however, found a positive relationship when researching some
papers from Turkey, US, and Canada by Lyroudi and Lazaridis, Akdoğan and Dinç, and Thapa.

The regression model showed that the relationship is multidirectional. They have noticed
a negative relationship with Days Sales of Inventory (DSI) and Cash Conversion Cycle (CCC) and
profitability but a positive relationship with Days Payable Outstanding (DPO), Days Sales
Outstanding (DSO) and Profitability, in SMEs. On the other hand, in large companies, there is a
negative relationship between DSO, CCC and ROA. The DSI was found to be the largest
determinant of profitability and efficiency as its impact was the greatest.
H1. There is a positive relationship between working capital and firm efficiency.
 P a g e | 10

Firm Leverage
Financial leverage is a very crucial part for every firm or company. Leverage means the
debt or borrowed money to raise the asset so that the firm or company can raise their revenue
through the asset. Although financial leverage makes negative effect on the net income because
increasing level of leverage make the amount decrease for the net income. Financial leverage
contains common equity level debt or preferred equity and lease that are used to rise the
firm’s total assets, operations, and financial growth. For every sector of firm their needs to
control or measure the financial leverage part maintain their common equity level.
(Tripathya, 2019) said the trend of Debt to Equity indicates that the Debt-to-Equity trend is
increasing gradually for those Life Insurance industry during the study period. This indicates firm
rely more on debt as debt is a tax-free source of financing. The trend of Debt-Equity indicates that
the Debt-Equity trend is increasing gradually for those Life Insurance industry, whereas the Life
Insurance industry value fluctuates throughout the study period. This indicates debt- equity may
not be the single variable which determined the Life Insurance industry’s value.
Descriptive statistics provides the means and standard deviations of the scores relating to each
of the variables used. Table 1 presents a summary of the descriptive statistics of the dependent
and independent variables used in the study. This confirms that they are in a less risky condition,
and something needs to encourage companies to enhance their business by getting more of debt to
have an increase in their value.
All variables are positively skewed except firms’ profitability. It may be observed that all
independent variables are positively associated except operating leverage which has a negative
impact on debt, sales growth rate and tangibility. There are no high correlations observed from
the data, which allows the conclusion that there is no autocorrelation between the independent
variables.
To check the problem of multi-collinearity among the variables, the variance inflation factor has
been used. A VIF test has been conducted to examine whether multi-collinearity exists amongst
independent variables. This shows that the use of debt capital is preferred over the equity in the
Life Insurance industry, and it gets supported as per the pecking order theory. Further, this
research would educate readers on the effect of Leverage on firm’s performance, and it will also
enable managers to understand how equity and debt affect firm’s performance and will then
 P a g e | 11

persuade them to adopt a cheaper source of financing. Leverage has a positive impact on Firm
performance and suggests that maximizing the wealth of shareholders requires a perfect
combination of debt and equity.
H2. There is a positive relationship between Leverage and firm efficiency.

Liquidity
According to (Katerina Lyroudi, 2000), financial liquidity refers to how light an asset is.
cash. Firms can measure liquidity by calculating the current ratio, quick ratio, or operating cash
flow ratio. Liquidity is important because it indicates whether it is impossible to repay or arrange
debt in the short term. This paper reviews several studies on liquidity indicators that focus on the
cash conversion cycle and provides an empirical comparison between the traditional liquidity
indicators of the Greek life insurance industry in 1997 and the contemporary liquidity indicators
mentioned above. tested to Impact on forecasts of current ratios, fast ratios, cash conversion cycles,
earnings, and leverage when changes in sales cause changes in working capital variables.
Similarly, management decisions that change the composition of working capital will cause
unpredictable changes in liquidity, profitability, and leverage ratios. Pearson's correlation
coefficients were estimated between CCC and CR and QR and between all three liquidity measures
and profitability measures ROI, ROE and NPM and leverage ratios DAR, DR, and TIE.
Finally, we examined the effect of size on firm liquidity. This study differs from other studies in
this field in that the cash conversion cycle was estimated and analyzed for the first time.
Focuses on Greek companies, providing helpful insights for both academics and managers
Informing Greek companies about working capital management in Greece about practices and
results in other, more sophisticated, and mature markets such as US and UK. Overall, the cash
conversion cycle is in the current rapid situation, demand, and inventory turnover period.
H3. There is a positive relationship between liquidity and firm efficiency.

Productivity
The rate at which a product or service is produced per unit of input is
Productivity (labor, capital, raw materials, etc.). This is measured as a ratio of power generated
To the extent of the inputs used. Productivity gains are affected by many variables.
Technological advances, economies of scale and scope, workforce skills, management
 P a g e | 12

changes in technology, other inputs (such as capital), competitive challenges, and

The economic cycle is all a factor to consider. Long-term improved living conditions
Driven by productivity. (Olper, 2014) studied the main thematic case that increased imports are
positively correlated with productivity gains and import competition in the life insurance industry.
Firm heterogeneity models help predict industry productivity growth through the selection process
from low to high productivity firms. The results help measure productivity issues and control
market size, countries and industries, and the endogeneity of import competition. These results
also have policy implications, as some products are purely competitive. Finally, more productive
firms can benefit more from trade integration.
H4. There is a positive relationship between fixed asset turnover and firm efficiency.

Profitability
(Nousheen Tariq Bhutta, 2013) states that profitability plays an important role in structure and
structure. Because corporate development measures the performance and success of a company.
improve it too company reputation. Corporate profit maximization is he one of the company's main
goals. Manager. Profitability is critical to business performance, especially in a competitive
environment. There is a significant positive relationship between size and profitability. the degree
a variety of financial, legal, and other factors (such as corruption) affect profitability in close
correlation to a fixed size. Company size is positively correlated with capital adequacy ratio.
Companies with growth opportunities moderately high number of development projects, new
product lines, and acquisitions repair and replacement of existing equipment. In addition, growth
opportunities and company size positively linked to profitability. Companies with little
opportunity for growth tend to show themselves Companies that are profitable and during growth
opportunities tend to look small. Profitability. There is a relationship between profitability and
inflation. He commented on the impact of inflation: A firm's profitability depends on its operating
costs and wages. Faster than inflation.
A study by (Ali Saleh Alarussi, 2018) found that the quality and efficiency of managers depend
on the quality and efficiency of managers. Ability to identify factors that lead to increased
profitability. General profitability is defined as the company's revenue, derived from the profit
after all deductions. Expenses incurred during a specific period. It is one of the most important
factors to signal. Management success, shareholder satisfaction, investor, and company
 P a g e | 13

attractiveness sustainability. It has been proven that a business will not survive if it is not profitable,
and a business that is highly profitable can reward its owners with high returns on their investment.
Thus, companies that want to achieve stable profitability need to know internal and external factors
that may have a significant effect on profitability.
Profitability is significantly affected by different factors. Many empirical studies have been done
to explore the association between various factors and profitability in different countries and
they have produced mixed results. For example, (StefanHenningsson, 2004) found a significantly
negative association between level of debt and profitability. This result is not consistent with
studies done on western economies but consistent with some of the studies done for Asian
countries. One important reason for this conflicting result can be the high cost of borrowing in
developing countries, like Malaysia, compared to western countries. (Gołaś*, 2020) suggested
corporations with high level of profitability having a high level of debts. (Bieniasz, 2012) found a
positive relationship between short-term debts and profitability (ROE) but a negative relationship
between long-term debts and ROE, when they studied 100 Iranian listed firms from 2001 to
2007.There is no doubt that efficiency is the cornerstone to achieve higher profits. Efficiency can
refer to the operations per se or to the whole company. It is expected that there is a positive
relationship between company efficiency (measured by assets turnover ratio) and profitability.
Therefore, based on the above discussion, the hypothesis is as follows: There is a positive
association between company efficiency and profitability.
H5. There is a positive relationship between profitability and firm efficient

The Data, Sample & Model Specifications

Data Description
This research was carried out on Bangladesh's Life Insurance industry and its efficiency.
Secondary data for the study was gathered from five publicly traded companies between 2015 and
2021 by observing the movements on their financial statements. The chosen time is significant
because it represents the most recent period in which the Bangladeshi Taka (BDT) depreciated
against the US dollar (USD). Furthermore, data from 2020 and 2021 are included, when the Covid
19 pandemic was already widespread globally and in Bangladesh. Based on previous research, the
study identified financial ratios that may play a role in determining a firm's efficiency. The
quantitative analysis methods used in this study are based on secondary data. Using financial
statement data, we identified several efficiency factors as independent variables.
 P a g e | 14

In this study, to measure the firm efficiency of the Bangladeshi Life Insurance industry, we have
chosen five variables with ten financial ratios that play an essential role in the context of the
Bangladeshi market. This study examined at the firm's efficiency with working capital, leverage,
liquidity, productivity, and profitability.

From this study we can clearly see that independent variable effected the dependent variable so
clearly. So, we have tried to show this relationship with mathematical equation-
Y = α + β1X1+ β2X2 + β3X3 + β4X4 + β5X5 + ε
Here, Y is the dependent variable,
Y = Asset Turnover Ratio
α = constant
β1 = Coefficient of Profitability
β2 = Coefficient of Productivity
β3 = Coefficient of Leverage
β4 = Coefficient of Liquidity
β5 = Coefficient of Working Capital
X1 = Profitability
X2 = Productivity
X3 = Leverage
X4 = Liquidity
X5 = Working Capital
 P a g e | 15

The Sample Collection

The sample size is chosen through systematic random sampling. Every object has the same
chance of being chosen in a simple random sampling process. In the case of many samples, a
completely random selection of people is necessary to ensure that the population is accurately
represented by the average sample. A sample is not necessarily a perfect representation of the
population, though, because of this. Consequently, out of all the life insurance companies in
Bangladesh, we've selected 10. From 2015 to 2021, we collected the relevant data from their
annual reports. On their website, we found all the information we required. The companies we've
selected as
samples are as follows:

1. National Life Insurance Company Ltd.

2. Pragati Life Insurance Ltd.

 P a g e | 16

3. Sonali Life Insurance Ltd.

4. Delta Life Insurance Ltd.

5. Popular Life Insurance Ltd.

6. Prime Islami Life Insurance Ltd.

 P a g e | 17

7. Rupali Life Insurance Ltd.

8. Meghna Life Insurance Ltd.

9. Fareast Islami Life Insurance Ltd.

10. Sondhani Life Insurance Company Ltd.).

Data Findings and Analysis

Descriptive statistics analysis
The descriptive statistics of a sample of data performs as an informational coefficient that complies
a representation of the sample of population. The measures of descriptive statistics can be denoted
by certain measures of tendency and variability as such as mean, median, maximum,
minimum, standard deviation, skewness, and kurtosis. The other measures that can help evaluate
 P a g e | 18

the goodness-of-fit test are Jarque-Bera and probability. Here, the measure of central tendency is
represented by mean which calculates the average the of the variables present, median identifies
the middle value, maximum and minimum specifies the highest and lowest values respectively.
The measures of variability as stated by standard deviation here describe the dispersion of the data
set, and the likeliness of occurrence is indicated by the probability of the data set. In relation to the
descriptive statistics and our measured ratios a table has been presented which can help us
evaluated the position of our chosen companies.

1.EFFICIENCY
In Firm Efficiency we can see that the mean value is 0.293487 and the median is 0.264923 which
is less than mean. After that the maximum value is 1.442306 and the minimum value is 0.031567
which one is much lower. If we look at this chart, we can observe our standard deviation is
0.207942 and skewness value is 2.674755, this one is the highest value in this firm efficiency. The
probability is 0.000000 which show an average relationship, and the chances of this variable
occurring are low.

2.LEVERAGE
After analyzing the chart, we can see that in leverage the mean and median value is 172320.0,
6229.465. Median is lower than mean value. The maximum value is 262.9918 which is highest
value in here and minimum is -916888.0. In this data base the standard deviation is 472546.9. If
we saw this chart the probability is 0.0000000 and the relationship is weak.
 P a g e | 19

3. LIQUIDITY
The mean value is 4.915589 and this is the fundamental of the database. Median the exact central
of database is 3.338994. After that 19.57824 and 0.528703 these are the data base of maximum
and minimum value of these charts. The standard deviation is 4.104870 and the probability is
0.000001 which shows an average relation. In there the probability is 0.0000000 which shows a
strong relationship.

4. PRODUCTIVITY
In productivity the mean value is 0.524165 and the median value is 0.323831. Here the median is
quite close to the mean. In this data base the maximum value is 2.547986 and the minimum value
is 0.034113. The standard deviation is 0.543037 and the probability is 0. 000000.In this probability
the relationship is weak, and the chances of variable occurring are low.

5. PROFIBILITY
The mean of profitability is 0.429563. The median value is 0.062320. The maximum and minimum
values are 5.610239 and -4.165164 respectively. The standard deviation is 1.777287 and the
probability is 0.000000 which shows a very weak relationship.

6. WORKING CAPITAL
The mean value is 4.915589 which describe the average number in the database. The median value
is 3.338994 in this database. The maximum value is 19.57824 and the minimum value shows a
negative value 0.528703. The standard deviation is 4.104870. The probability is 0.000001 which
shows a very weak relationship, and the chances of this happening are very low.

Correlation Analysis
(M., n.d.) defined correlation as “a statistical method used to assess a possible linear association
between two continuous variables”. It is used to measure the relationship between two variables
and. A positive correlation is a relationship between two variables that tend to move in the same
direction that means if a variable increases, then other variable also increases which present a
strong relationship. It is denoted by Pearson’s product-moment correlation. The score which is
between +0.5 to +1 refers a very strong positive correlation. Besides a negative correlation is a
relationship between two variables that tend to move in the opposite direction. The scores between
-0.5 to -1 refers a strong negative correlation that indicates if a variable rises then other must be
reduced.
 P a g e | 20

For our study, we analysis the correlation value of independent variables with respect to the
dependent variable firm efficiency. The table below shows the correlation values, obtained using
EViews software. To examine the correlation with respect to the dependent variable we look the
at the values from the first row, corresponding to firm efficiency.
 P a g e | 21

Correlation between: Asset Turnover Ratio and Total Depth Ratio

The correlation between firm efficiency and leverage is 23.09 which represents a positive
relationship. This indicates, these two variables tend to move in the same direction. Their
relationship is weak.

Correlation between: Asset Turnover Ratio and Current Ratio

The relationship between firm efficiency and liquidity is 4.91 it’s a negative relationship while
both variables move up in the same directions. This relationship is very strong.

Correlation between: Asset Turnover Ratio and Fixed Asset Turnover

The correlation between firm efficiency and productivity is 0.52. It indicates positive relationship
while both variables move up in the same directions and it’s derived a very strong correlation
between firm efficiency and productivity

Correlation between: Asset Turnover Ratio and Return on Equity

The relationship between firm efficiency and leverage is 0.429 which suggest a negative relation.
This indicates, these two variables tend to move in same direction. Their relationship is very weak.

Correlation between: Asset Turnover Ratio and Current Asset – Current

Liability
The correlation between firm efficiency and productivity is 4.49. It indicates positive relationship
while both variables move up in the same directions and it’s derived a very weak correlation
between firm Asset Turnover Ratio and Return on Equity.

Discussion of results
Current Asset-Current Liability – measured by log working capital; Total Debt Ratio – measured
by debt ratio and debt equity ratio; Total Current Ratio – measured by current asset ratio; Fixed
Asset Turnover– measured by fixed asset turnover ratio; Return on Equity – measured by gross
profit and return on equity ratio; and firm efficiency as a dependent variable – measured by Asset
turnover in Bangladeshi listed companies were investigated empirically in this study. The
following is an explanation of the findings:
 P a g e | 22

Working Capital
The findings demonstrate that working capital (as measured by Log working capital) and firm
efficiency have a negative and significant relationship. The t-value of the coefficient is -1.83E-08,
and the p < 0.05, showing a negative and significant association. This strong negative link can be
explained by the fact that it often indicates that the company has incurred a high financial outlay
or a significant increase in accounts payable because of a major purchase of goods and services
from its vendors. These findings contradict those of (Sagan, 1955), (Grinyer, The determinants of
corporate profitability in the UK electricalengineering industry, 1991), (Al_Arussi, 2009)

As a result, the first hypothesis can be rejected.

 P a g e | 23

Leverage
Total debts and the debt-to-equity ratio were used to calculate financial leverage in this study. The
finding reveals that leverage (debt/equity ratio) has a positive and not significant relationship. The
coefficient t-value is 0.006157, and the p > 0.05. This positive link can be explained by the fact
that larger borrowings indicate that the company is at more danger because of its asset being used
inappropriately to make sales. This supports the argument that deciding between debt and equity
forces companies to trade-off between business and financial risk to some extent, and that when
companies borrow more to meet their needs, they have no effect on corporate ownership but do
have a significant impact on the level of financial risk (Yazdanfar, 2013)

The second hypothesis cannot be rejected because the probability of our data is not substantial.

Liquidity
Liquidity is the third variable, and in this study, the relationship between liquidity (as assessed by
the current ratio) and company efficiency was investigated. The results demonstrate a positive but
non-significant relationship between the two variables, contrary to expectations. The coefficient
has a t-value of -0.015063 and p > 0.05. This negative relationship can be explained in a few ways.
It means the business is in bad financial shape and is less likely to experience financial difficulties.
The lower the ratio, the lower the business's safety margin for meeting current liabilities. (Gitman,
2015)

But as our result is not significant, the fifth hypothesis cannot be rejected.

Productivity
Firm productivity is measured in this study using the fixed asset turnover ratio. This ratio indicates
how much a company's fixed assets are used to produce revenue. The relationship between
productivity and efficiency is expected to be positive, and the results show that the two variables
indeed have a positive and significant. The coefficient has a t-value of -0.001457 and p < 0.05.
This significant negative relationship can be explained by the fact that fixed assets are not a portion
of a firm's asset, and if the firm manages its fixed assets well, it can generate lower returns. As a
result, it will improve the firm's efficiency and vice versa. (Hillier, 2013)

As a result, the fourth hypothesis cannot be rejected.

 P a g e | 24

Probability
The relationship between profitability and firm’s efficiency is investigated in this study (measured
by Gross Profit and Return on Equity). The results suggest that company efficiency have a negative
and non-significant relationship. The profitability coefficient t-values are 0.073036 and p > 0.05.
Previous research, such as that conducted by (Nulla, 2013) and (Sheikh, 2013), has demonstrated
a favorable association between Return on equity and Asset Turnover Ratio.

We can state that the fifth hypothesis cannot be rejected because our result is not significant.

Conclusion, limitations, and application

The financial ratios that may have a substantial impact on the level of Asset Turnover Ratio in
Bangladeshi listed Life Insurance are examined in this article. Working capital is calculated using
log working capital; Total Debt Ratio is calculated using debt ratio and debt equity ratio; Current
Ratio is calculated using current asset ratio; Fixed Asset Turnover is calculated using fixed asset
turnover ratio; and Return on Equity is calculated using gross profit and return on equity ratio.
Data from 10 businesses listed on the Bangladesh Life Insurance company, spanning the years
2015 to 2021, was taken from annual reports, and EViews software analysis was utilized to
investigate these associations (pooled OLS regression was used to analyze the data). Running
random-effects and fixed-effects models both support the Pooled OLS results. Working capital,
liquidity, productivity have negative and leverage have positive associations with profitability,
Asset Turnover ratio according to the findings. On the other hand, have a positive relationship with
efficiency. To construct hypotheses, the study employs both agency theory and resource-based
theory. This study, like all others, has limitations. For starters, the sample size is modest, with only
five organizations covered during a five-year period (2015–2021). Nonetheless, the findings of
this study aid management by allowing them to be aware of the financial indicators that are linked
to their firm's efficiency. The findings also assist other interested parties, such as investors, in
making the best investment decisions. Furthermore, this research backs up the agency theory and
resource-based theory with actual evidence. Finally, the A current study suggests that future
research should include more variables or be a comparative study with different companies from
different nations to see if firm efficiency is influenced by the same factors in different business
contexts.
 P a g e | 25

Reference:

(n.d.). Retrieved from annual report (2020-20210:

file:///C:/Users/USER/Desktop/bus485%20assignment/Annual%20Report%202019-
2020.pdf

Abdulazeez Y.H. Saif-Alyousfi, R. M.-R.-M. (2020, June 17). Determinants of capital

structure: evidence from Malaysian firms. Asia-Pacific Journal of Business
Administration. doi:10.1108/APJBA-09- 2019-0202

Abor, J. Y. (2005, December). Retrieved from Research Gate:

https://www.researchgate.net/publication/46546619_The_effect_of_capital_structure_on_p
rof itability_An_empirical_analysis_of_listed_firms_in_Ghana

Arianto, K. a. (2008). Struktur Kepemilikan, Profitabilitas, Pertumbuhan Aktiva dan

Ukuran Perusahaan Terhadap Struktur Modal Pada Perusahaan Manufaktur. Vol. 12 No.
1 : 11-21.

CFI. (n.d.). Retrieved from capital structure:

https://corporatefinanceinstitute.com/resources/knowledge/finance/capital-structure-
overview/

Chen, J. (2004). Determinants of capital structure of Chinese-listed companies. Journal of

Business Research, Vol. 57 No. 12, pp. 1341-1351.

Chung, K. &. (1991). Financial Management, 20, 21-33. Retrieved from

https://doi.org/10.2307/3665748

Estimating A Regression Model. (n.d.). Retrieved from

http://www.eviews.com/help/helpintro.html#page/content/demo-
Estimating_a_Regression_Model.html

Eugene F. Fama, K. R. (2004). The Capital Asset Pricing Model: Theory and Evidence.
Journal of Economic Perspectives, VOL. 18, NO. 3, SUMMER 2004, (pp. 25-46). Retrieved
from https://doi.org/10.1257/0895330042162430
 P a g e | 26

F Voulgarish, D Asterigiu. (2007, Jan 22). Retrieved from

https://www.tandfonline.com/doi/abs/10.1080/0269217042000186714

Hayes, A. (2021, august 29). investopedia . Retrieved from

https://www.investopedia.com/terms/l/liquidity.asp#:~:text=Liquidity%20refers%20to%20
the% 20ease,market%20liquidity%20and%20accounting%20liquidity.

J.Chen, J. (2004, December). Retrieved from Science Direct:

https://www.sciencedirect.com/science/article/abs/pii/S0148296303000705

Kole. (1991). Financial Management, 20, 21-33. Retrieved from

https://doi.org/10.2307/3665748

Page |27 Lewellen, L. C. (1987, December). sciencedirect.com. Retrieved from Journal of

Accounting and

Economics, Volume 9, Pages 229-313: https://doi.org/10.1016/0165-4101(87)90009-7

Mia, M. U. (2006). Analisis Variabel-Variabel yang Mempengaruhi Struktur Modal Pada

Perusahaan-

Perusahaan LQ-45 di Bursa Efek Jakarta. Ekonomika, Hal. 228- 245. Politeknik Negeri,
Bandung. Myers, S. (1977). Determinants of corporate borrowing. Journal of Financial
Economics, Vol. 5 No. 2, pp.

147-175.

Nadeem Ahmed Sheikh, Zongjun Wang. (2003-2007). Determinants of capital structure An

empirical study of firms in manufacturing industry of Pakistan. Retrieved from Academia:
https://www.academia.edu/6315058/Determinants_of_capital_structure_An_empirical_stu
dy_
of_firms_in_manufacturing_industry_of_Pakistan?fbclid=IwAR3DzOg9Fy_z1aUz77XaM
W4JcgK8 ksvr8ybYByOV3CeYE1c2dZJPfrWraIU

Nicodème, G. J. (2008, December 3). Corporate Income Tax and Economic Distortions.
SSRN Electronic Journal. doi:10.2139/ssrn.1310070
 P a g e | 27

Noravesh, I. &. (2010). The effect of financial leverage on investment in companies listed in
Tehran Stock Exchange. Journal of Financial Accounting, Second Year, (II), 35-48.

quickbooks. (n.d.). Retrieved from https://quickbooks.intuit.com/in/resources/finance-and-

accounting/understanding-liquidity-ratio-analysis/

Seppo Kari, O. R. (2014, November). Literature review of the dynamic effects of corporate
income taxation. Valtion taloudellinen tutkimuskeskus. Retrieved from
https://vatt.fi/documents/2956369/3012237/muistiot_40.pdf

Serena Fatica, T. H. (2013). The Debt-Equity Tax Bias: Consequences and Solutions. (D. B.
Supérieur, Ed.) Reflets et perspectives de la vie économique, LII(1). Retrieved from
https://www.cairn.info/journal-reflets-et-perspectives-de-la-vie-economique-2013-1-page-
5.htm

Smith, C. W. (1992, December). Journal of Financial Economics, 32, 263-292. Retrieved

from sciencedirect : https://doi.org/10.1016/0304-405X(92)90029-W

statistic how to . (n.d.). Retrieved from https://www.statisticshowto.com/probability-and-

statistics/statistics-definitions/adjusted-r2/