Examining the Effect of Free Cash Flows and Cash Flow Ratios on Profitability

Abstract

This study aims to determine the effect of free cash flow and cash flow ratios on the profitability
ratios of 57 enterprises in the BIST 100 Index. For this purpose, the data of the enterprises in the
relevant index between the years 2005-2021 were taken into account. The panel regression
analysis was used within the scope of the research. In addition, Return on Assets and Return on
Equity as dependent variables in the research, free cash flow and cash flow ratios (Cash Flows from Operating, Investment, and Financing Activities/Total Assets) as independent variables, and finally Company Size, Financial Leverage Ratio, Sales Growth Ratio as control variables taken into account. As a result of the study, a positive relationship has been revealed between Profitability Ratios, free cash flows, and Cash Flows from Operating Activities. In addition, a positive relationship was found between Return on Assets and Cash Flows from Financing
Activities. In terms of control variables, a positive relationship was found between Return on Assets and Sales Growth Ratio and a negative relationship with Financial Leverage Ratio