A Diagnostic Study of Capital Structure and Profitability of Indian Pharmaceutical Sector Companies.

Abstract

Capital Structure is an intrinsic and essential feature of financial accounting with long lasting implications. This research paper aims to examine the relationship capital structure has with return on equity and degree to which it causes the effect on it. Short term debt to total assets ratio, Long term debt to Total Assets ratio, Total debt to total assets ratio and company size are taken as independent variables. The study encompasses Pharmaceutical sector companies for a period from 2011 to 2020. Suitable statistical techniques have been utilised to analyse the data and improve the results' trustworthiness. According to the findings of the study, short term debt to total assets has positive and very significant relationship with return on equity.Long term debt  to total assets too has  positive but insignificant relationship withreturn on equity while company size has negative but significant relationship with return on equity. Total debt to Total Assest ratioisdiscovered to be ineffective in terms of influencing the return on equity of business enterprises. The study's findings will help academics and businesses make better decisions.