Impact of Capital Structure on the Profitability in the Manufacturing and Non-Manufacturing Industries of Pakistan

Abstract

The aim of this paper is to observe the connection between the capital structure and profitability and in fastidious, to measures their significance in manufacturing and non manufacturing industries of Pakistan. The paper adopts a quantitative data of different manufacturing and non manufacturing organizations in Pakistan. The financial statements were analyzed of manufacturing and non manufacturing organizations of Pakistan for the period of 2008-2013. The study reveals that there is a strong negative relationship between the profitability and debt in manufacturing industry and in the Non -manufacturing industry, there is a strong positive relationship between profitability and debt. The population of this study is Manufacturing and Non-Manufacturing industry of Pakistan and units of analysis are D.G Cement factory and AGTL from Manufacturing industry and, HBL & Bank Al-Falah from Non-Manufacturing industry. In this paper descriptive statistics were used to interpret the data. It is proved that manufacturing industry has found a strong negative regression between debts and profit and the non- manufacturing has found a strong positive regression between debt and profit.

Keywords: Total debt; capital structure; profitability, performance; Return on Equity; Return on investment; Earning Per share and Price to Earnings Ratio, leverage.