The Role of Operating Income on the Internal Long-Term Financing Decisions

Abstract

This paper aims to demonstrate the roles and importance of the operating income of the management of Jordanian industrial companies, and the extent to which they depend on it to make the necessary financial decisions in order to meet their long-term needs. The data was collected from the financial reports of companies representing the study community for the period 2012-2016, after being classified by different industrial sectors. The research employed the operating incomes as an independent variable and long-term internal financial decisions as a dependent variable. The results of the data analysis showed a disparity between the different industrial sectors. The Engineering and Construction industries achieved the highest average of the ratio of long-term internal financing by 0.986, due to the importance of this activity on the Jordanian economy and the size of the high investment in it from the researchers' point of view. The lowest average was shown in the Paper and Cardboard sector by 0.550, due to the lack of investments in it compared to other industrial sectors that are more important to the Jordanian economy. The overall annual average of long-term domestic financing for all sectors was 0.892. The results also showed a statistically significant role for operating income in long-term internal financial decisions by the management of Jordan's public industrial joint stock companies.