Abstract:
Purpose
The objective of this study is to identify the impact of capital structure on the profitability of
automobile industry of Pakistan in view. The research was conducted to investigate the impact of
capital structure on firm’s performance .The study is has taken automobile industry which is a
different area not discussed in available literature. The study discussed what ratio is suitable for the
automobile firm in term of its financing.
Methodology
This study focused towards the components of the capital structure and contribution of capital
structure in profitability of the firm. Hence the objectivism approach was the best to identify the
performance so it’s best for the study. As the study is not focusing more over developing new
theories but using previous literature which is conducted by different researchers so due to this reason
the study is using deductive approach .The research is conducted on the 3 automobile companies
from the automobile industry. The financial statements of the companies wereanalysed. The
collection of the data is done through financial statements which are collected based on 10 years .The
data would be critically analysed through Descriptive statistics. Multiple regressions were applied on
each of the pair of independent and dependent variable to find the causality.
Findings
This research concludes that there has a significant impact of capital structure on the profitability of
the firm. Equity financing is important aspect for the eventually growth and major expansion of the
firm. On the other hand, debt financing also important to save the firms for taxes.
