IMPACT OF CAPITAL STRUCTURE ON THE PROFITABILITY OF AUTOMOBILE INDUSTRY, A CASE OF PAKISTAN.

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.