Capital Structure and Profitability of Listed Indian Top Companies - An Analytical Study

Abstract

A debt-equity ratio that optimises the company's overall worth or lowers the weighted average cost of capital is regarded as the optimum capital structure. According to previous research studies, companies that avoid debt and depend on equity do better. Short-term loans are bad for a firm’s financial health, while long-term debt and equity could be better. Performance is influenced by foreign ownership, the concentration of ownership, and organisational size as well.The researcher wishes to look at the best performing firms on the NSE, therefore 10 companies were chosen to represent each sector, and data on capital structure (debt-equity ratio) and its influence on the company's financial performance was analysed. According to the study, companies with zero debt do well; organizations with excessive debt perform well, and companies with fluctuating debt have a large negative impact or little impact. The researcher suggests that a more thorough examination be conducted to determine whether the high-interest debt is truly necessary and that potential and cost-effective long-term funding solutions be explored.

Keywords: Capital Structure, Debt-equity ratio, Earnings per share, Return on assets, return on equity.

DOI: 10.7176/RJFA/13-2-01

Publication date: January 31^st 2022