Financial ratios affecting stock returns in ecommerce companies

Abstract

The paper aimed to find out the relationships between stock returns and three financial ratios. The author selected 23 listed Ecommerce companies as sample and searched the financial information over 9 quarters from 2017 to 2019 through Bloomberg terminal. The penal data analysis methodology was used to test the data and to draw conclusions. The results show that profit margin, debt to equity ratio, and quick ratio all have significant positive relationships with stock returns. High profit margin and high quick ratio will motivate investors to buy stocks, since they will confidentially consider that the companies are profitable and stable. Although high debt to equity ratio requires companies to pay much debt, investors will believe that higher debt to equity ratio probably generates much tax shield and then high dividend paid, so that companies will generate higher return on stocks.