An Analysis Of The Debt Equity Structure Of Selected Pharmaceutical Firms In India

Abstract

Capital structure is one of the most prolific domains of research in corporate finance. An unplanned capital structure may often lead to failure and bankruptcy of a firm. Considering the importance of debt -equity mix as an important decision in the overall performance of firms, the present study tried to examine, analyze and discover the industry benchmark and scrutinize how capital structure plays a momentous role in the companys overall growth. The financial results of the various pharmaceuticals firms has been considered and concluded that leverage seems to be working in favour of the few firms while moving in opposite direction for the other firms. Firms that have been moderately geared are able to generate good returns to shareholders (ROE). The reassessing the debt-equity mix would result in better financing decisions and enhances financial performance for other firms. Besides new ROE have also been calculated and findings confirmed that the firm generating highest ROE is same. In order to evaluate more realistically the firms performance, market capitalization can also be a true barometer. The movement in stock prices may also be one of the factors that affect the investor decision making. Despite low ranking in ROE for few firms, they are quiet popular among the investors. Further, the findings reached to the conclusion that the results of market prices and market capitalization combined with ROE can provide useful information for the firms overall performance. Key words: Capital Structure, Firm Performance, Leverage, Return on Equity, Capital Gearing, Profitability.

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