Abstract:
Production and service are the important activities in this modern world.
Most of people (i.e., investors and public) can see that many instructions
have been established for rendering things and service to customers
which seems a strong competition between these companies. Companies
have to face competitive threatening among them. Therefore, company
must consider capital structure decision well to perform. An attempt has
been made to analyze the capital structure and its impact on companies'
performance during year 2005 to 2009 (05 years) of listed
manufacturing companies in Sri Lanka. Operational hypotheses are
formulated and results revealed that there is statistically significant
positive relationship between equity capital and companies'
performance measured by Return on Equity (ROE), Return on Assets
(ROA), Earning per Share (EPS), and Tangibility. On the other hand,
there is an insignificant negative relationship between debt capital and
ROE, ROA, EPS and Tangibility of the company. The outcomes of the
study may guide entrepreneurs, loan- creditors and policy planners to
formulate better policy decisions in respect of the mix of debt and equity
capital and to exercise control over capital structure planning and
thereby to control and reduce bankruptcy costs.
