The Impact of Capital Structure, Investment Growth and Liquidity on Financial Performance of Cement Companies

Abstract

The financial performance of cement businesses listed on the Pakistan Stock Exchange (PSX) from 2014 to 2024 is examined in this study in relation to capital structure, investment growth, and liquidity. Two important metrics have been utilized to assess the financial results i.e return on equity (ROE) and return on assets (ROA). The debt-to-equity ratio, changes in fixed assets (as a stand-in for investment growth), and the current ratio (to demonstrate liquidity) were the independent variables. In order to assess the conjunction between these financial characteristics and business profitability across 18 cement companies, the study used a quantitative approach and linear regression analysis. The findings show that neither ROA nor ROE were significantly influenced by any of the independent factors, including capital structure, investment growth, or liquidity. The limited explanatory power of the regression models raises the possibility that other operational or external factors could more accurately explain financial performance in this capital-intensive industry. These results suggest that the profitability of the cement sector in Pakistan may not be accurately predicted by conventional financial parameters. For a more thorough grasp of the dynamics of financial performance, the study suggests that future research include both firm-specific operational measurements and macroeconomic variables.