Impact of Capital Structure and Liquidity Conditions on the Profitability of Pharmaceutical Sector of Pakistan

RukhsanaRasheed (), Mehwish Shahid (), Munaza Mukhtar and Mazhar Nadeem Ishaq ()
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RukhsanaRasheed: Department of Management Sciences, The Govt. Sadiq College Women University, Bahawalpur, Pakistan.
Mehwish Shahid: Department of Management Sciences, The Govt. Sadiq College Women University, Bahawalpur, Pakistan
Munaza Mukhtar: Department of Management Sciences, The Govt. Sadiq College Women University, Bahawalpur, Pakistan
Mazhar Nadeem Ishaq: Department of Economics, The Islamia University of Bahawalpur, Pakistan

iRASD Journal of Management, 2022, vol. 4, issue 2, 135-142

Abstract: This study was conducted to find the impact of capital structure and liquidity condition on the profitability of pharmaceutical firms listed with Pakistan Stock Exchange (PSX). The dataset was comprised of eleven years 2010 to 2021. To assess profitabilitylevel, to dimensions return on assets (ROA) and gross profit margin (GPM) were used. The capital structure was measured through debt-to-equityratio (DER) and debt to total funds (DTF). The liquidity level was measured through current ratio (CR) and acid test ratio (ATR). The OLS regression, fixed and random effect models were used for analysis. The findings proved that high debt to equity ratio significantly and negatively affect the profitability. The liquidity conditions have positive association with profitability of firms. The study suggested that owners and company managers should use optimal value of debt and liquidity conditions for profit maximization and to reduce the cost associated with debt capital.

Keywords: Capital structure; Profitability; Liquidity; Pharmaceutical sector; Fixed and random effects models (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ani:irdjom:v:4:y:2022:i:2:p:135-142

DOI: 10.52131/jom.2022.0402.0068

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