CAPITAL STRUCTURE AND PROFITABILITY OF FINANCE COMPANIES IN NEPAL

Abstract

The objectives of study are to examine the impact of capital structure on the profitability of the financial companies. To explore the factors affecting the profitability of finance companies. To analyze the relationship between capital structure and profitability of the financial companies. The objectives are meet using the descriptive and casual comparative research design. The independent variables of the study are Long term Debt, price earnings ratio, Total Liabilities to Total Assets, common Stock and dependent variables are return on equity and return on assets. The population of the study are 17 finance companies. The sample are three finance companies running Namely Manjushree Finance Limited (MFL), Pokhara Finance Limited (PFL) and Good will Finance Limited (GWFL). The data are secondary nature collected from the annual report of the finance companies. The descriptive statistics analysis, correlation analysis and regression analysis are conducted for the achievement of the objectives. It is found that the Total Liabilities to Total Assets and return on assets has positive and significant impact. Price earnings ratio, common Stock and Long term Debt have not significant impact ot the return on assets. The impact of Total Liabilities to Total Assets to the return on equity is positive and significant. Price earnings ratio, common Stock and Long term Debt have negative and not significant impact the return on equity. The result of the minimum, maximum and mean different are seem very high and the standard deviation also seem very high for all the variables. The higher standard deviation mean the higher fluctuate or deviate in the data flows. In conclusion the current status of the each variables is fluctuating in nature. The relationship of total liabilities and total assets is significant with return and assets and return on equity. The price earnings ratio and return on assets and return on equity is not significant. The common stock and return on equity and return on assets is not significant relationship. The long term debt and return on equity and return on assets is nit significant relationship. Keywords: Price earnings ratio, common Stock and Long term Debt, total liabilities and total assets, return on assets and return on equity