IMPACT OF DEBT STRUCTURE ON PROFITABILITY IN TEXTILE INDUSTRY OF PAKISTAN

This study aims to analyze the impact of capital structure (i.e. short-term, long-term and total debts) on the profitability of companies in textile industry of Pakistan, while controlling the size of the company. A total of 17 companies (initially 7 and then another 10) were selected randomly for the study. Regression analysis was conducted on six different regression models. The results show that there is a significant and positive impact of short term debts on the profitability of the firm, however long-term debt has no impact on the profitability. It is shown that short-term debts are useful for companies having small sales and vise versa. This study has potential for replication in other industries like cement, petroleum and pharmaceutical.