*2.2. Profitability*

A high degree of profitability leads to a decrease in the degree of indebtedness, as it is assumed that firms will resort to indebtedness to prevent managers from spending from the available cash flow. A high level of rentability also means the ability of the company to borrow more easily. (Cortez and Susanto 2012; Krishnan and Moyer 1996; Psillaki and Daskalakis 2009; Rajan and Zingales 1995; Titman and Wessels 1988) obtained a negative association between profitability and indebtedness, while (Alipour et al. 2015; Song 2005) obtained a positive one. Chaklader and Chawla (2016) show an insignificant relationship.

#### *2.3. Liquidity*

A high degree of liquidity implies a lower degree of debt. An optimal level of liquidity presumes less requirement for borrowing and external funds, according to pecking order theory and agency theory. In contrast, based on trade-off theory, the companies should ensure an optimal level of liquidity in order to fulfil their engagement. Chadha and Sharma (2015) found that liquidity is statistically insignificant. Alipour et al. (2015) obtained a negative relationship between liquidity and leverage.
