3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

Figure 4: Return on equity of selected companies in the last ten years

Source: Authors’ calculations based on Macrotrends (2024a, 2024b, 2024c) Pearson’s correlation coefficient describes the relationship between the return on equity and the examined ratios. It can range from -1 to 1, where values close to 1 or -1 indicate a strong positive or negative linear relationship, while a value close to 0 suggests a weak or no linear relationship. Based on the findings (see Table 1), it is possible to hypothesize that in the case of Tesla, the decrease in the use of debt negatively affected the ROE, which, however, was more than compensated by an increase in asset turnover. The operating profit margin of Tesla has a positive trend over time and a positive impact on ROE, which, however, due to its turbulent development over time, is not reflected in the value of the correlation coefficient. As mentioned above, the decrease in Tesla’s indebtedness is directly related to its increase in profitability. Furthermore, it is possible to hypothesize that in the case of Volkswagen Group, the ROE was primarily maintained due to the growth in profit margin. In the case of Toyota Motor Corporation, it is possible to hypothesize that a slight decrease in ROE can be primarily attributed to a decrease in operating profit margin, although this impact is not very intense, and Toyota Motor Corporation has the most stable relations between key financial parameters among the examined companies.

Table 1: Pearson’s correlation coefficient between ROE and selected financial ratios

Toyota Motor Corporation

Variables

Tesla

Volkswagen Group

ROE and assets turnover ROE and equity multiplier ROE and operating profit margin

0,70 -0,95

-0,35 -0,30

0,56 0,32

-0,03

0,82

-0,13

Source: Authors’ calculations based on Macrotrends (2024a, 2024b, 2024c)

32