Navigating Volatility: How to Maintain Strong Profitability in Uncertain Times: Evidence from Manufacturing Firms

The ultimate objective of this study is to shed light on the factors that affect the profitability of firms operating in the manufacturing industry. Using 10,125 observations of 225 manufacturing firms listed on Borsa İstanbul, the author performed regression analysis to identify profitability determinants. Internal factors such as firm size, leverage, the ratio of intangible assets to total assets, the current ratio and the asset turnover ratio are identified as important determinants of sample firms’ ability to generate consistent profits. In contrast, macroeconomic conditions, including inflation and interest rates, do not exhibit statistically significant effects. The robustness checks validate the empirical results. The findings of this study offer several key benefits, both in terms of practical applications and theoretical contributions. By identifying the factors that drive profitability, firm management can make more informed strategic decisions, investors could determine whether a stock is undervalued or overvalued in the stock market, and banks and other creditors can project their future cash inflows by examining the association between financial ratios and profitability.