Abstract

San Miguel Corporation is a Filipino multinational publicly listed

conglomerate holding company. SMC is considered as the Philippine’s largest

corporation in terms of revenue and also the largest publicly listed food,

beverages, and packaging company in Southeast Asia. Being considered as one

of the largest corporation, it is important to know the financial performance that

may affect the financial condition of the business operation.

This study sought to establish the relationship between financial leverage

and profitability of San Miguel Corporation. The researchers used different

statistical tools and techniques such as correlational research design and

regression analysis to analyze and interpret the data they gathered. They also

used financial leverage ratios such as debt to equity, debt to asset, and time and

interest earned ratios while net margin, ROE, ROA, and, earnings per capital

contribution to measure the corporation’s profitability. The researchers utilized

the secondary data obtained from quarterly reports of SMC from year 2011 up to

2016. Data was analyzed using Pearson Correlation and trend analysis.

The result indicated that financial leverage depicted no significant

relationship with profitability. The researchers accepted the hypothesis that there

is no significant relationship between financial leverage and profitability. The R-

values, in relation to debt to equity, of net margin, return on equity, return on

asset, and earnings per share shows figures all close to the value of 0.00 which
indicates no correlation between variables. It signifies that debt to equity has no

significant relationship to profitability ratios.

From the figures showed by the net margin, return on equity, return on

asset, and earnings per share, it can be inferred that

The limitation of this study is that it only uses the financial leverage and

profitability ratios as variables. Profitability is influenced by many factors other

than the ones discussed in this study and along these lines, it is imperative to

consider different components that have bearing on profitability and establish

whether the findings will hold or not after which conclusive outcomes can be

drawn. From the results obtained, it is inferred that financial leverage does not

contribute to profitability of the corporation. The study recommends that San

Miguel Corporation is a highly leverage corporation and therefore should be

cautious on borrowing funds and be attentive to its increasing liabilities and

expenses to maintain a strategic distance from the corporation’s net loss in future

time.