Impact of Profitability on Capital Structure: An Analytical Study

Capital structure is the combination of debt and equity that finance the organization's strategic plan. The main purpose of this study is to assess the impact of profitability on capital structure in respect of the firm based in India as well as in China. To attain the decision, different theories of capital structure are considered. This article provides a short review of literatures based on the previous published journal. The analysis was taken on 40 literatures out of which 21 taken from Indian articles and the rest 19s are from Chinese articles. The result of the study reveals that 65% of the article shows the inverse relationship, 20% of the article shows the positive relationship and 15% of the article shows no relationship between capital structure and profitability. This study also provides an empirical picture of 3 Chinese iron and steel company and 4 Indian steel companies. Empirical study takes two profitability parameters i.e. return on investment and return on equity. This study also shows that out of 7 companies most of the companies support an inverse relationship between capital structure and firm's profitability. Santu Charan Das"Impact of Profitability on Capital Structure: An Analytical Study" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-4 , June 2018, URL: http://www.ijtsrd.com/papers/ijtsrd14265.pdf http://www.ijtsrd.com/management/accounting-and-finance/14265/impact-of-profitability-on-capital-structure-an-analytical-study/santu-charan-das