IMPACT OF CAPITAL STRUCTURE ON PROFITABILITY OF MANUFACTURING COMPANIES IN NEPAL

Abstract

This study investigates effect capital structure on profitability of manufacturing companies in Nepal. Secondary data was gathered from manufacturing companies of Nepal for ten year periods (2013/14-2022/23). This study used correlation and multiple regression analysis to analyze the data. The correlation analysis shows that debt to equity ratio (DER) and debt to total assets have significant negative relation with profitability (ROA and ROE) of manufacturing companies in Nepal. Moreover, size of companies has significant negative relationship with profitability (ROA and ROE) of the manufacturing companies. The regression result reveals that debt to equity ratio has insignificant negative effect on ROA but it has significant negative impact on ROE of the manufacturing companies while debt to assets ratio has insignificant positive impact on profitability (ROA and ROE) of manufacturing companies. Further, size of companies has significant negative impact on profitability (ROA and ROE) of the manufacturing companies in Nepal. Hence, this study concluded that capital structure has insignificant impact on profitability of manufacturing companies in Nepal