The Degree of Indebtedness of Companies and How It Is Influenced by Financial Management Decisions

The aim of this article is to analyze the influence of financial and operational factors at the level of companies in the automotive, machinery, and components industry, based in the European Union, on the degree of indebtedness, measured by the ratio of financial debts to total assets. The results highlight a negative relationship between the degree of indebtedness and the company size, the share of fixed assets and the current liquidity, indicating the large and liquid companies’ preference for financing from internal sources. In contrast, the return on total assets and the net margin have a positive impact, suggesting that profitability targets can stimulate external financing. Operational performance also plays a significant role: a high inventory turnover can reduce the level of indebtedness, while an extended period of collecting receivables will require additional external financing. The main contribution of the study is to highlight the interaction between profitability, operational performance, and financing structure decisions, providing relevant benchmarks for managerial strategies in a sector characterized by high financial requirements and a quick paced technological development.