IMPACT OF CAPITAL STRUCTURE ON THE PROFITABILITY OF MANUFACTURING COMPANIES IN NEPAL: A CASE STUDY OF SARBOTTAM CEMENT NEPAL
Anusha Thapa, Dhirendra Man Thapa, Dekendra Man Khadka
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The study investigated the impact of capital structure on the profitability of manufacturing companies in Nepal, with a focus on Sarbottam Cement Nepal as a case study. A quantitative research design was adopted, and financial data from the company’s financial statements were utilized. The main financial ratios analyzed included debt to total assets, debt to total equity, return on total assets, return on equity, and net profit margin. Regression analysis was employed to examine the relationships between these variables. The findings of the ratio analysis revealed fluctuations and mixed performance in the debt management, profitability, and liquidity of Sarbottam Cement Nepal over the years. The debt-to-equity ratio showed variations, while the debt-to-assets ratio remained relatively stable. Return on equity and return on assets exhibited varying trends, with improvements in profitability until a decline in the later years. Net profit margin remained generally low, indicating a narrow profit margin. Liquidity remained stable throughout the years. The regression analysis results indicated that the debt-to-equity ratio and debt-to-assets ratio did not have a significant impact on return on equity. Similarly, these ratios did not significantly affect the return on assets. Liquidity and size also did not show statistically significant relationships with return on equity and return on assets. The independent variables did not demonstrate significant relationships with the profitability indicators of Sarbottam Cement manufacturing company.