Relationship between profitability and capital structure: Financial performance of infrastructure companies of india

Abstract

Shareholders' interests are the driving force of any business. Among other interests, one of the most important is maximizing wealth and making the best use of the company's revenues and proceedings. To accomplish this, one of the most important decisions that the firm must make is its capital structure, which has the greatest impact on a company's profitability. Myers, S. C. (1984) describes capital structure as a combination of equity, debt, and other types of instruments that fund the company. According to Panigrahi (2012), capital structure refers to the share of long-term sources of cash, including owner funds and borrowed funds. Owner's finances include equity share capital, preference share capital, reserves and surpluses, or retained earnings, Borrowed funds include long-term obligations such as debentures, loans from banks, and loans from other financial organizations. Hasan et al. (2014).