Impact of Capital Structure on Profitability in the Fertilizer Sector of Pakistan

Abstract

The present study relates to the impact of capital structure on profitability and the study is focused on the fertilizer sector of Pakistan. This study aims to examine whether the debt and equity financing used for financing operations impacts a company’s profitability in the fertilizer sector of Pakistan. Data from four large companies in the fertilizer sector of Pakistan representing about 89 percent of the market share is used for analysis. Data is collected from published Annual reports of these four companies. Data for eight years from 2006 to 2013 is used for analysis. SPSS is used for analyzing the data and linear regression is applied to generate the results. Regression analysis is used to analyze the relationship between capital structure and the profitability of a company. The output of regression analysis is created in the form of a scatter diagram and tables to interpret the results of the regression. Results suggest that there is no significant relationship between capital structure and profitability of a company in the fertilizer sector of Pakistan. Results also show a significant relationship between current liabilities and the profitability of the company in the fertilizer sector of Pakistan.
 JEL Classification Code: E22, G32, M49