A Study of Capital Structure and Profitability of Indian Steel Sector Companies

Abstract

Capital Structure is an integral and important part of financial management having long term consequences. This research study attempts to investigate the association capital structure has with profit after tax to sales and extent to which it creates the impact on it. Long term debt to equity ratio, Interest coverage ratio, Long term debt to total assets ratio and Fixed assets to total assets ratio are taken as control variables. The study encompasses Indian steel sector companies for decade. Appropriate statistical techniques have been used for analysis and better dependability of the results. The research study pointed out that Long term debt to total assets has strong negative and very significant relationship with profitability. Fixed assets to total assets too has strong but positive relationship with profitability. Long term debt to equity and Interest coverage were found to be irrelevant in terms of influencing the profitability of business enterprises. The results of this study will provide meaningful insights to the academia and the corporate for better decision making.