CAPITAL STRUCTURE AND ITS IMPACT ON THE PERFORMANCE AND PROFITABILITY OF COMPANIES

Companies can survive for a short time without careful capital structure planning, but they will ultimately fail to acclimatize to changing conditions and face difficulties to raise finances to support operations. An establishment’s capital structure influences not just how important money it makes for its stockholders, but also how well it endures profitable downturns. As a result, capital structure is important for a company's growth and survival, as it's a major element in achieving long- term pretensions and objects. The pivotal strategic issue that public enterprises face is determining the right balance of equity and debt. A poor backing may stymie a company's fortunes and put it in fiscal distress. Several studies have discovered a positive relationship between the dependent and independent variables, whereas other discovered negative relationship. Likewise, different capital structure propositions handed distinct theoretical framework for assessing the impact of these factors on firm capital structure decision. The trade- off proposition, for illustration, implies a direct relationship between debt and profitability. The pecking order proposition, on the other hand, predicts that debt and profitability are equally related. As a result, it would be fascinating to learn which proposition stylish explains Indian enterprises. The trade- off proposition, on the other hand, predicts a negative link between debt and performance, because elevated threat and a failure of capital makes debt more precious. Likewise, the pecking order theory assumes that as profitability declines, the demand for external finances arises as internal finances no longer fulfill the capital conditions. Further, this study also analyzes whether capital structure decision contributes to establishment’s fiscal performance and can be used as leading index for unborn fiscal performance. The purpose of this exploration is to probe the link between capital structure and establishment performance. It’ll help the director and several other connected stakeholders in determining a capital blend that will raise the establishment’s value while contemporaneously lowering its costs. This exploration will also serve as a solid root for determining the capital structure of the company under disquisition.

               

KEYWORDS: Investigation, Capital, Business, Economic, Structure, Organisation, Financial, Funding.


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