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The Impact of Capital Structure on Profitability of Companies Listed in Colombo Stock Exchange

Author

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  • Kafeer.A.M

    (Sri Lanka Institute of Advanced Technological Education, Sri Lanka)

Abstract

The issue of how companies select and change their strategic mix of securities has sparked considerable interest and discussion in corporate financial literature. The interest stems from the fact that the financing mix influences the cost and availability of capital, as well as the firm's investment decisions. The question of the importance of a firm's strategic financing decisions for its own valuation is at the forefront of such discussion, among other issues. The main purpose of this analysis was to investigate the impact of capital structure on the profitability of retailing companies listed on Colombo Stock Exchange. The study sample consists of 13 retailing companies listed on Colombo Stock Exchange from 2016 to 2020. Multiple regression models were used to determine the impact of capital structure on profitability. The independent variables (capital structure) are debt to equity ratios, debt to capital ratios, and equity to total assets ratios, while the dependent variables (profitability) are gross profit ratios, net profit ratios, return on assets ratios, return on equity ratios, and return on capital employed ratios. The results of study revealed that there is a positive relationship between debt to capital ratio and the profitability variables and each capital structure variable has a different significant level, indicating that capital structure has a significant effect on the profitability of Sri Lankan listed retailing companies.

Suggested Citation

  • Kafeer.A.M, 2025. "The Impact of Capital Structure on Profitability of Companies Listed in Colombo Stock Exchange," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(9), pages 1410-1420, September.
    • Handle: RePEc:bcp:journl:v:9:y:2025:issue-9:p:1410-1420
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    References listed on IDEAS

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