Impact Of Capital Structure On Firm Financial Performance Of Food And Personal Care Product Sector In Pakistan

Abstract

The Capital structure remain a subjective and an important matter for a firms, it contains the different combination of funding used by a firm to run its operations. The researchers have focus to study the impact of capital structure on firm’s financial performance of Food and personal care product in Pakistan. Thus, Research has covered the period of Ten years (2014-2023). The Sample of the research is the food and personal care sector of Pakistan, by taking top ten (10) listed companies with Pakistan Stock Exchange (PSX) that are covering the high market share in Pakistan respectively. To make substantially significant results study uses Pearson correlation technique, to find the relation of variables and the intensity of the relationship whereas multiple regression is used to check the cause-and-effect relationships of the variables. Debt-to-Equity Ratio (DER) Long-term debt-to-total assets(LDTA), Interest  Coverage ratio (ICR), Short-term debt-to-total assets(SDTA) used as proxy of capital structure however to determine Financial performance of a firm, Net Profit Margin (NPM), Earnings per Share (EPS), Return-On-Asset (ROA), Return-On-Equity (ROE) used as a dependent variable. Results have revealed that there is significant impact of capital structure (LDTA, SDTA, ICR and DER) on firm performance (ROA, ROE, NPM and EPS).  In addition, correlation revealed the negative relationship of LDTA on (ROA and NPM) while ICR is positively correlate to all measures of profitability (ROA, ROE, NPM and EPS). 

Key Words: capital structure, firm financial performance food and personal care, product sector. psx