Does Capital Structure Effects Profitability of The Firms (Evidence from Firms Listed at KSE 100 Index)

Abstract

Adequate capital structure of any firm can enhance the firm performance. To verify this statement this study has been conducted. To check the impact of capital structure on the performance of firms 8 firms have been selected as a sample. These firms have been chosen from KSE 100 index. Ratio analysis have been applied on the data. Different ratios have been calculated for the purpose of analysis. This analysis have been conducted on seven years data from 2007 to 2013. Regression analysis and correlation analysis have been applied on data to check the relationship between capital structure and profitability. It is concluded that the capital structure have negative effect on the profitability of firms. As the debt ratio increase year by year, the profitability of firms decrease. There also some limitation of the study of limited sample size and analysis techniques.

Keywords : Capital structure, profitability, financial performance