How Capital Structure Relates to Financial Position in Electricity Sector of Pakistan: A case of IESCO

Abstract

In this study main purpose was to know the impact of capital structure on financial position of electricity sector of Pakistan IESCO because almost there is no study which examined the impact of capital structure on financial performance in this industry in Pakistan. This is secondary data-based research and 10 years data was taken from company's website. The financial position of the firm is characterized by 4 variables namely Return on Assets, Return on Equity, and Assets Turnover and Fixed Assets Turnover. Out of the four hypotheses, it was concluded by using regression analysis that capital structure negatively affects return on assets and return on equity. However, it affects Asset turnover ratio positively and quite significantly. Moreover, it was also revealed that capital structure has an insignificant impact on fixed assets turnover. The extent to which capital structure is responsible for variance in return on equity and assets is 78.1% and 47.8% respectively. Moreover, there is a nominal influence over the variance of asset turnover ratios of capital structure.