IMPACT OF CAPITAL STRUCTURE ON PROFITABILITY OF NEPALESE MANUFACTURING COMPANIES

Abstract

The objectives of the research are to examine the current status of the capital structure and profitability of a manufacturing companies in Nepal, to analyze the relationship of Total Debt to Total Assets, Debt equity ratio, Interest coverage ratio, short term debt to total assets and Long term debt to total assets to the profitability and to examine the impact of Total Debt to Total Assets, Debt equity ratio, Interest coverage ratio, short term debt to total assets and Long term debt to total assets to the profitability. The descriptive and casual comparative research design is used for the research. The secondary data are collected from the annual report of the respective selected sample manufacturing companies. The descriptive analysis, correlation analysis and regression analysis are used for the analysis of the data. The result shows the different between minimum and maximum is very high and different between mean and minimum, mean and maximum is also high. Also the standard deviation is high. The overall result shows the current situation of the selected manufacturing variables are fluctuating. The relationship of total debt to total assets and, debt equity ratio, short term debt to total assets to the return on assets is negative and significant. The interest coverage ratio to the return on assets is positive and significant relationship. The long term debt to total assets to the return on assets is negative and not significant relationship. The total debt to total asset to the return on equity is negative and not significant relationship. The interest coverage ratio to the return on equity is positive and not significant relationship. The debt equity ratio, short term debt to total assets and long term debt to total assets ratio have negative and not significant relationship. The impact of total debt to total assets, deb equity ratio and short term debt to total asset ratio to the return on assets is significant. The impact of long term debt to total assets and interest coverage ratio to the return on assets is not significant. The impact of total debt to total assets, deb equity ratio and short term debt to total asset ratio to the return on equity is significant. The impact of interest coverage ratio and long term debt to total assets ratio is not significant to the return on equity.