Impact Of Capital Structure On Financial Performance Of Manufacturing Firms In Nigeria (A Study Of Selected Firms In Nigeria)

ABSTRACT

 Capital structure decision is fundamental for the survival of business organizations. It is the most significant discipline of company 's operations. The ability of the organization to carry out their stakeholders need is closely related to the capital structure. The determination of a company's capital structure is a dfficult task to achieve. Therefore, this paper empirically investigated the impact of capital structure on the financial performance of the selected manufacturing firms in Nigeria from 2006 to 2015. Descriptive and regression research technique was employed to analyze the impact of some key variables such as returns on asset (ROA), Returns on equity(ROE), Net Profit Margin (NPM), Return on capital employed (ROCE) and Profit after Tax (PAT) on firm performance. Secondary data was employed using data derived from ten (3) selected manufacturing firms. Base on the findings, Debt to Equity has a negative but signflcant impact on the Net Profit margin, Return on Capital Employed, Return on Asset and Return on Equity of firms in Nigeria. Debt to Asset ratio has a positive and significant relationship to the Net Profit margin, Return on Capital Employed, Return on Asset and Return on Equity of firms in Nigeria. We strongly recommend that firms should use more of equity than debt in financing business activities. This is because in spite of the fact that the value of a business can be enhanced with debt capital, it gets to a point that it becomes detrimental. It is also recommended that each firm should establish with the aid of professional financial managers, that particular debt-equity mix that maximizes its value and minimizes its weighted average cost of capital.