CAPITAL STRUCTURE ANALYSIS OF AUTOMOBILE INDUSTRY

Abstract

Capital structure is one of the most complex areas of financial decision making due to inter relationship with other financial decision variables. In finance, the capital structure is the most debatable topic and continues to keep researchers pondering. A good capital structure helps to gain attractive profit, and the absence of a proper capital structure affect the debt position as well as the leverage which leads to great financial risk. The decision becomes even more difficult, in times when the economic environment in which the company operates presents a high degree of instability. Therefore, the choice among the ideal proportion of debt and equity can affect the value of the company, as much as the return rates can. This study analyses how far the capital structure affects the Profitability of corporate firms in India. The study tries to establish the relationship as to how far the capital structure affect the business revenue of firms and what the interrelationship is between capital structure and Profitability. This study is arrived out after categorizing the selected companies of Automobile Industry in India. Ratios analysis has been done to show the profitability state of the selected automobile companies in past five years. Also market capitalization of the companies has been calculated to show the comparison between the companies. Share holding pattern has been analyzed to know from where the company is getting capital from and also fluctuations in the debt have been analyzed. Correlation and Regression Analysis in addition the ratios has been used. The study proves that whether there is a strong one-to-one relationship between Capital Structure variables and Profitability variables.