A STUDY ON CAPITAL STRUCTURE AND ITS IMPACT ON PROFITABILITY

Abstract

The project report of “capital structure and its impact on profitability”. The research includes study and analysis of current market, identification of the problem and its features. The work is basically concentrated on perception towards performance, what will be its effect on the market. Which factors it should concentrate on and what are the different servicing methods used to improve service quality.
The assets of a company can be financed either by increasing the owners claim or the
Creditors claim. The owner’s claims increase when the form raises funds by issuing ordinary shares or by retaining the earnings, the creditors’ claims increase by borrowing. The various means of financing represents the “financial structure” of an enterprise.the financial structure of an enterprise is shown by the left hand side (liabilities plus equity) of the balance sheet. Traditionally, short-term borrowings are excluded from the list of methods of financing the firm’s capital expenditure, and therefore, the long term claims are said to form the capital structure of the enterprise the capital structure is used to represent the proportionate relationship between debt and equity, it includes paid-up share capital, share premium and reserves and surplus. The financing or capital structure decision is a significant managerial decision .it influences the shareholders returns and risk consequently; the market value of share may be affected by the capital structure decision.