Analysis of capital structure determinants of Ambuja company

Capital structure represents the proportion in which equity capital and debt capital is employed to finance the assets of the companies. Over the years capital structure decision is very crucial and important because of the fact that it affects net profit, earning per share, cost of capital, dividend pay-out ratio and liquidity position of the companies and consequently the affects value of the companies that in turn is necessary for the sustainable economic development. The purpose of this paper is to measure, evaluate and empirically studies the relationship between capital structure and financial performance of Ambuja cement company India. The data of 10 years has been taken to study the impact of composition of capital structure on the value of a company and it is observed that change in the financial leverage of a firm will lead to corresponding change in the Weighted Average Cost of Capital (WACC) and hence the value of the company. An increase in the leverage leads to increase in the value of the firm.