Comparative Analysis of Capital Structures and its Impact on the Financial Performance of Top Steel Companies in India
Published: 2017
Author(s) Name: Mishu Tripathi and Shantanu B. Roy |
Author(s) Affiliation: Assit. Prof., Finance, Thakur Institute of Mgt. Studies and Research, Mumbai, Maharashtra.
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Abstract
Capital structure is one of the most important areas of financial decision making. In this study
we attempt to examine capital structure and its impact on financial performance of selected Indian
Steel Companies during the year 2015 and 2016. Correlation, ANOVA and multiple regression
models are used to analyze the data for the study. Firstly, we computed Gross Profit Margin (GPM),
Net Profit Margin (NPM) and Return on Capital Employed (ROCE) as an indicator of financial
performance (dependent variables) and Debt Equity Ratio (DER), Interest Coverage Ratio (ICR)
and Debt Assets Ratio (DAR) as measures of capital structure (independent variables). The result
of multiple regression and ANOVA indicated that there is a significant impact of capital structure
on financial performance of Indian Steel Industry. Correlation results confirmed that there is negative
relationship between Capital Structure and financial performance. The result of the study serves
as a guide to creditors, management, financial institutions and other users to take better investment,
financing and capital decisions.
Keywords: Capital Structure, Financial Performance, Profitability, Multiple Regression and Indian Steel Industry
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