The Impact of Free Cash Flow on Profitability of Listed Diversified Holding Companies in the Colombo Stock Exchange

Abstract

The purpose of this study is to identify the effect of free cash flow on the profitability of the Diversified Holding companies listed in the Colombo Stock Exchange. This study will facilitate individual and institutional investors with information to take appropriate decision, as this paper delivers whether the free cash flow actually influences profitability or not. The population consisted of nineteen (19) companies listed as Diversified Holdings on the CSE in June 2019. A Purposive sampling method was used to pick a sample of 17 companies listed at CSE (panel data). Secondary data was extracted from audited financial statements and annual reports of the firms, sourced from CSE for a period of five years (2014 –2019). Data analysis was done using a regression model since the nature of the data was quantitative. Free cash flows have a significant impact on the profitability of the listed diversified holdings companies in Sri Lanka. As per the given results through the analysis, it can be concluded that free cash flows, firm size and the Lag value of ROCE have a significant impact on the firm profitability.

Keywords: Diversified Holding companies, Free cash flow, Profitability