Impact of capital structure on firm's profitability: evidence from Indian Telecom Industry

This paper aims to examine the impact of capital structure decisions of firm's on its profitability and performance. The study was conducted using two approaches: theoretical and empirical. For theoretical aspect we reviewed key theories on capital structure one of them is Modigliani and Miller approach and for the empirical study we took database from company's financial statements, for this purpose the theories studied served as the foundation for empirical study. This paper includes empirical analysis of Indian firms listed on stock market. A sample of 10 companies is selected randomly and their financial statements are taken for a period of 4 years from 2010 to 2013. The effects of leverage in capital structure are studied on profitability of firms. The profitability of firms is measured in terms of return on total assets (ROTA) and return on investment (ROI). Findings of the study suggest that capital structure has significant effect on the profitability of the firms.