Author(s):
Anusha Thapa, Dhirendra Man Thapa

Doi: 10.7508/aiem.01.2023.48.51

This is an open access article distributed under the Creative Commons Attribution License CC BY 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

A suitable capital structure is a requirement for profitability and must be taken very seriously. The era of traditional business organizations operating for profit is over. The modern business environment is more complex and competitive. Consequently, business sustainability has become a topic of discussion worldwide in recent years. Every business organization places a high priority on making a profit because an organization’s ability to sustain itself in the marketplace depends on its profitability. The study was conducted in 2021 to determine the trends in the debt-to-total assets ratio, the debt-to-equity ratio, the liquidity and size effects on the firm’s return on equity, return on assets, and net profit, as well as the relationship between capital structure and the firm’s profitability. The two manufacturing companies of Nepal viz Ghorahi Cement Industry and Sarbottam Cement Nepal were selected for a detailed study of profitability and capital structure. The required data from the year 2068 to 2077 were collected. Minimum, maximum, mean, and standard deviation have been used in descriptive statistics to describe the positions of capital structure and profitability. Correlation and regression analysis have been used to examine the connection between capital structure and profitability. The researcher identifies positions with debt and debt-to-equity ratios that are lower than average. Likewise, the level of ROE was found to be higher than average. In contrast, it has been found that ROA and NP positions are below average. Debt ratio has been found to have a poor relationship with ROA, NP, and size. Similarly, the debt-to-equity ratio had a poor correlation between ROA, NP, and Size. NP, size, and liquidity all have a strong negative correlation with it.

KEYWORDS:
ROA, NP, ROE, Debt equity and Debt Assets