A STUDY ON IMPACT OF CAPITAL STRUCTURE COMPOSITION ON THE PROFITABILITY OF SELECTED COMPANIES
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Author(s):
SOWMYAH PV, SAMPRIYA SUKUMAR, PEARL GONSALVES
Vol - 9, Issue- 1 ,
Page(s) : 348 - 353
(2018 )
DOI : https://doi.org/10.32804/IRJMST
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Abstract
The Modigliani Miller theory is complemented as the linchpin of present day finance. The crux of MM theory mentions that the company’s performance and profitability is independent of its capital Structure as the sources of financing in itself would not affect the firm’s value. The Net Income approach and the Net Operating Income approach explains that the Debt-Equity Mix of a company has an important bearing on the value of the firm (indicated through the performance and profitability) and also that the weighted average cost of capital is affected by the capital structure which in turn significantly affects the value of the firm.
This paper through the use of statistical tools aims to prove that the key profitability and performance indicators EPS and Dividend and are unaffected by the capital structure and that other activities of the firm like cash flow activities and EBIT is the true indicator of the value of the firm.
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