Abstract:
In recent years, extensive studies have been undertaken concerning to examine the
relationship between profit margins and return on investment.. However researches
on the relationship between profit margin and return on investment have not been
made. This study attempted to give some knowledge about the relationship between
profit margin and return on investment in Sri Lankan listed companies. The major
problem behind this study was "what is the relationship between profit margin and
return on investment of listed companies in Sri Lanka?". Listed companies in
Colombo stock exchange have been studied in nine business sectors. Gross profit
margin and net profit margins were measure of profit margins and return on assets
and return on equity were measure of return on investment in this study. Relevant
financial figures for analyzing profit margins and return on investment extracted
from 2018 year financial reports of the selected 100 companies. Correlation analysis
was made to find out the relationship between independent and dependent variables.
The statistical package of the social sciences (SPSS) version 22.0 was used to test
the conceptual model and to obtain at these findings. A week positive relationship
(respectively 0.147,0.205,0.190, 0.285) was found between Gross profit margin
and return on assets, Gross profit margin and return on equity, net profit margin and
return on assets, net profit margin and return on equity as the profit of the firms.
From the above four results in found that there was a week positive liner association
between profit margin and return on investment.
