BUFT Journal of Fashion and Technology

Impact of Capital Structure on Profitability of Cement Industry in Bangladesh

Pabna University of Science and Technology; University of Rajshahi
Email: mamunfin38@gmail.com

Abstract

Purpose: This paper seeks to unearth the impact of capital structure on theprofitability of listed cement companies at the Dhaka stock exchange in Bangladesh.Methodology: Data have been collected from secondary sources for the 10 yearsfrom 2009-10 to 2018-19 to accomplish the objectives. Data gathered tabulated,categorized, arranged, and concluded the necessary calculation for the production ofpanel data to fulfill the purpose. The capital structure ratios, profitability, andmultiple linear regressions have been used to analyze data with the help of IBMSPSS-21. Capital structure ratios are short-term debt to total assets (STDTA),long-term debt to total assets (LTDTA), total debt to total assets (TDTA), long-termequity debt (LTDEQ), and total equity debt (TDEQ) and are considered to be theindependent variables. The return on total assets (ROA), return on equity (ROE) areselected as the profitability and used as a dependent variableFindings: Results forced to conclude that short-term debt to total assets, long-termdebt to total assets have a neagtive effect on the return on total assets. This impliesthat the company would reduce profits by accumulating more borrowed money. Onthe other hand, short-term debt to total assets, long-term debt to total assets have apositive influence and long-term equity debt have a negative impact on return onequity.Limitations: The study is conducted based on secondary data. So the validity andreliability cannot be judged. There are 32 cement companies of Bangladesh ofwhich only seven are listed so the availability of data scope of the study was narrow.Practical Implications: This implies that the firm raises more borrowed capital willreduce profit. So the authorities should use debt judiciously.Originality: Research indicates that profitable companies are less dependent ondebt as their key funding choice. In the case of Bangladesh, a high proportion of thedebt is covered by short-term debt.