RESERCH&MANAGEMENT PROJECT

Topic: The impect of capital structure and liauidity of corporate return in

firms

Prepared by:
Name:

M.Shahid Naseer
Ghulam Abbas

Class:

BS Commerce

Roll No.:

7605&7608

Session:

2010-2014

COLLEGE OF COMMERCE
GOVERNMENT COLLEGE UNIVERSITY, FAISALABAD

1. Introduction:
Capital is called the feasibility that strong the growth resources, yield, output,
return, profit, interest rate, magnitude of business and finish the problem of debt of business. It
improves the performance of business.it is that blood of the organization and play vital role in the
production sector for the business establishment. It is used for purchasing machinery and
highring the expert persons. With the good capital structure the manager makes good policies for
the organization. It is vital role in the retained earnings or in the reserves. The firm or
organization is more alternative who has own capital as compared to the other company who
higher the capital. The capital structure provides platform, frameworks, air drone and ports for
establishing the new business and enters in to the new markets of any country. It is called the
asset of effective business. Capital of own business is more motivated as compare to other
business.
We can start any type of business if we have own capital because other factor are adopted
with the help of capital, for example land purchasing building construction and developing other
factors. Capital structure helping to decision making and improving the standard of economy.
This is debenture reserve and retained earning these developing the increasing the more effective
business and creates the trust image in the people minds. The more profitable firm has long
capital as compared to other companies due to fear of liquidation. In the preparation
consideration we can say that without capital an organization cannot be established. More
profitable firm depends on the internal investing as compared to the external financing of other
companies.
Two analytical tools are used for capital structure (1) Descriptive statistics and multiple
regression. If capital is not own than the short term and long term debt increases the liability of
the firm which decreases the loss., success improvement, development, headway achievement of
business depends on the capital and capital networking. The business man has own capital. If the
business has suffered the loss then he can bear it and motivate them and cannot run the business
without capital otherwise he stopped the business. If employees are more expert person they are
visited to the different countries of capital organization in order to showing the talent. In other
hand employees are very loyal with the organization of small capital but due to small return they
overlook the business and join the capital organization business due to higher capital.

The manager can introduce the new technology and competes his business in the market
with the other competitors. Due to good capital the organization can launch more branches or
franchise such as Punjab college gourmet KFC etc. at good location. Due to good capital
ceremonies, other company visit bounces and other factor can be archived. The capital structure
can impact on the manufacturing firm with the good quality and quantity and important standard
products are produced and attracting to customer with reward system and low discount terms.
There is more effectively condition that we can invest the money for time to time but do not
intend to diminish. The capital of firm is that capital to purchasing the assets such as
inventories .marketable securities, fixed assets to increase the growth of the organization.
The capital structure is more helpful to the foreign investment. The multinational
companies investment in the foreign countries with reasonable risk means that he will getting
maximum return on the investing the capital therefore basic requirements of the foreign
investment(i) Actual resources (ii)investing capital (iii)Enterprise (iv)Technical Skills. The
foreign direct in which the low rate of interest in home country and high rate of interest in the
foreign country. There is more impact on the capital structure. There are the inflow capital of
country is more profitable to increase the Investor income. The capital structure can impact on
the firm investment and control high risk in the organization.
Many of institution said that the capital plays vital role in the business sector. This theory
depends on the dividend, securities, and preference stock. Cash out flows and cash inflow mainly
depends on the capital. The Capital is gaining through sources. The best sources of getting
capital are good environment. Only institution can register its business through good
performance, Output and reputation that is only available due to good capital.
The profitability of claims of termination of business depends on the capital criteria.
There are two categories in order to commencing the new business, the first is called success and
second is called failure. Risky situation is found in the business activities, if you have good
capital and good management skills and made all activities are performed in the business in well
manner. You people should be succeeding in the business risk, on the other hand if you may
suffer due to some mistake of management.

Production sector or problem of financing you will be fare the name of failure. A good
business man should always fare the difficulties in the business line. There are two way of
investment, the first way is called insider investment and second one is called outsider
investment. In the first one the finance is invested the employees of the company and in the
outsider investment the finance is invested outsider employees or not employees of the company.
For the high type of business the Govt. higher ratio of tax which has to pay the business,
if company has good capital ,than it can be easily pay out wise it may suffer of deficiency. In the
large type of business, the loan facility is given to the firm of poor employees for the domestic
use. It is only possible when capital structure will be strong in order to doing the business of
export and import. We should pay duck dues and custom charges those dependents on the
business capital nature, because the capital play vital role in the business sector.
According to philosopher The capital is an amount that is available at the time of
necessity and business will be run on the right angle. Some important points which are more
focused in the capital criteria.
1. Extra capital should be available for business doing.
2. By using this capital in better way, the performance and amount of capital should
be increased
3. By using this capital we should earn the profit which basic purpose of starting the
new business.

2 Literature Review
Here such information are described that are about to the literature in order
to providing the literature framework that practically make up the corporate capital structure.
Alternative choice of capital, it also consist the company profit&loss situation. We have to
understand fully situation position, quality idea of capital which will be used in order to establish
the new business. This literature shall cover the Theoretical frame work, Established of capital,
selection of capital structure and capital structure company profit.

2.1 Theoretical Framework:

The capital study consists on the theoretical framework for the

sake of the corporation of capital structure. It mainly focuses on the business profit, of the
corporation of capital structure. It mainly focus on the business profit, polices, laws, procedure,
method which are made by the companys management here different terms are operated For
example, Debt, Equity, Retained earnings, and stock etc., These all above factors are affect able
for the organizations performance. These factors play a vital role in the reputation and goodwill
of the organization. In order to commencing the new business the capital is calculated from the
different alternative resources. One business can has different type of equity, Finances, debt, this
thing very important for the market value.
In the other word the region and location also affects for the capital purpose.
Different author have given the different arguments about the order of formulating and
composing the capital structure of different theories are made for the capital of firm. Debt
financing is more important than the equity in order to achieving the profit for maintaining the
situation of the firms. Due to these aspects tax benefits are more and tax liabilities are less. If
business gain less profit than the bankrupt situation is operated which is losable for the business
capacity. Due to this reason the people do less trust on the business. These are maximum chances
of termination of business. If business can earn more profit than bankrupt situation will be
decreased, the people will more trust and believe in the business because there is strong position
in the profit. When there is strong image of the business then they can get the loan easily then
creditors have no fear of bankruptcy situation. In the other word we can say that the mix of debt
and equity is called firms capital structure. The firm manager maintain the moderate level of the
mixture of the debt and equity for the shake of running business. The activity of debt is
returnable for the businessman and create risky situation for the shareholder.

2.2 Establishing of capital Structure:

The capital structure depends on the long term sources and similarly short term
resources if we give the example of the long term finance that is debt and equity and the short
term finance is cash and reserve etc.it is also called the range of internal and external financing.
The capital structure includes the following things.
(i) Reinvested Profit

(ii)Short term debt financing

(iii)Long term financing
(iv)New equity capital
(v) New equity capital from outsider
Debenture are also included in the capital structure. The debenture holder and the equity holder
are the owner of the firms.

2.3 Selection of the capital structure:

This is very main stage that is adopted at macro and micro level of the economy.
A micro level much time and cost is wasted. The capital structure is determined by the
management policy. The more profitable firms make long term debt capital than the short term
debt due to liquidation of capital. Long term debt is more preferable to the firm for the purpose
of trade and this payback fund to the debt. In this situation the firm of manager can control the
capital policy then these prefer to the debt financing to debt capital. The capital should as
enactment on the better choice on the manager is to be appointed to run the organization and
firms.
The shareholder of the organization that can be more prefer to the debt financing
rather than the equity financing. The debt financing is more payoffs the debt to the organization.
The capital structure decision of the firm is characterized by the firm management and control of
the company. Firms decide to choose the debt capital in the capital structure to unequally to
survive to select the debt financing to run the operation.

2.4 Capital Structure and Company profit:

The capital structure decision depends on the market or company value or book
ratio. Company profit and target leverage are the inversely proportion to each other. When
company has only one source of finance than it is financially weak and low rate of credit for the
capital structure internal and external financing is also focused. However more profit firms
comprises on the internal financing. The capital structure of the company is give investor the
high rate of return in the company activities. We required that firm making the high rate of return

t obligate the fund to their firms. The capital structure is acquire the firm depends slowly firm
performance profitability and ability to produce the funds internally and externally .These are
most proper to give the chance to achieving the objective of the organization. As to more the
more investor the act of making a choice the value of fund positively increased and becoming the
more funds are collected to do the activities of the firm the share value of the firms stock is to be
increased.

3. DATA AND METHODOLOGY

To determine working capital Structure impact on profitability of financial
sector such as Banks of Pakistan, secondary data of these firms is used. The
data for the study is collected from the publications of State Bank of Pakistan
as well as from the publications of Karachi stock exchange. The required data
is also gathered from the official websites of the banks incorporated in the
study. The data is taken from the balance sheets of the banks of financial
sector.
A simple random sample of 31 banks is selected in financial sector of
Pakistan. The time period of 5 years starts from 2008-12.

Methodology of Research
The methodology deals with model description, data requirements and
secondary sources of data.
Three systematic tools were used in this work, via: descriptive statistics and
correlation and multiple regression systematic models. Multiple critical
models will be used to approximation the relationship

between level of

business profit (substitutions by return on equity) and the identified

components of capital structure such as short-term debt, long-term debt,
total liability (creating up of equity capital and reserves) and business
liquidity rates, etc. The descriptive statistics will be used to conduct economy
analysis on these capital structure components mostly made up of indices of
gearing (i.e. debt and equity).

Experimental implementation of the model will be making use of a crosssectional time series data covering 20082012 to determine the influence of
capital structure variables on corporate profits among the financial sector of
Pakistan.
3.1. Model Specification
Model specification in which use of different model and use the different
variables such as, via: value of short-term debts, value of long-term debts,
and domestic liquidity ratio. In our model we wanted to establish if quantum
of short-term debt, long-term debt, and corporate liquidity profile will have
significant influence on business structure of financial sector of Pakistan.
Therefore the need for the modification in our model.
Thus the models for the study are specified as a regression function as
follows:
Profit = f (Capital Structure)
Dependent Variables:
Dependent variables are those variable which those on the
other variable is called dependent variables in this paper use of the
ROE(Return on equity) are the dependent variable such as following.
ROE= (Earnings available to common shareholders/ Total Equity) 100
ROE= ao X e
Where:
ROE = the measure of productivity which is return on equity capital
employed;
ao = the regression constant (i.e. intercept of equation);
i = the change coefficient for it variables;
it = the different independent variables for productivity or liquidity of the
corporate firms
i and t ;
t = is the time period for the series;

e = the random error term which captures other explanatory variables not
explicitly
Include in the model.
The general list squares equation

above will now be restated with the

specified variables
Thus below;
ROE = f (RSDTL, RLDTL, RECTL, RLDTEC, VSTD, VLTD, DLQR)
(-)

(-)

(-)

(+)

(-)

(+)

(+)

Where:
ROE = return on equity is the dependent variable. It is a measure of
corporate
Performance and profitability.

Independent variable:
The Ratio of short term debt to total liability (RSTDL) is the independent
variable which shows the performance of the debt in the business of the
financial.
The Formula of the Ratio of short term debt to total liability (RSTDL)
RSTDL

= Short term debt/Total Liability

Ratio of Long term debt to Total liability (RLDTL)

This ratio in which measure the long term debt
in the total liability. This ratio shows the performance of the long term debt.
The formula of the Ratio of Long term debt to Total liability
RLDTL= Long term debt/Total liability
Ratio of equity capital to total Liability (RECTL)
This ratio in which the measured the equity
capital in the total liability. This ratio shows the performance of the equity
capital.
The formula of the Ratio of equity Capital to total liability

RECTL= Equity capital/Total liability

Ratio of long term debt to Total equity:
This ratio measured the long term debt to calculate
among the equity of capital.
Formula
RLDTEC= long term debt / equity capital
Domestic liquidity Ratio:
This ratio show the domestic of the use of cash and reserve
in the firms
Formula:
DLQR= Cash+ all reserve/Current liabilities *100
Value of long term debt (VLTD):
These ratios show the long term debt value of the firm in
the firm and sector and receive the all of debt in the firm

Value of short term debt:

This variable shows the value of the short term debt of the firm and also
measured the value of the short term debt in the firm
After all the estimated the equation of the ROE
ROE = ao - b1 RSDTL - b2 RLDTL - b3 RECTL + b4 RLDTEC - b5 VSTD + b6
VLTD + b7 DLQR + e
3.2. Data Requirements and Sources
The study samples are firms listed on the Karachi Stock Exchange. There 31
banks were selected covering the financial sector of the Pakistan. They
include the all the of cash and reserves are stored in this sector all the
financial transaction are involved in this sector. The data used for the study
include annual reports and statement of accounts of 31 banks for the years
2008 2012, retrieved and completed by the many research paper. These
form the secondary data for the study, which were generated from balance

sheets and accounts of this financial sector. This period was chosen because
of accessibility to the financial statements.

4. Estimation of Results and Discussions:

This section provides the
details of the model and findings of the study. Before moving towards formal
discussion of results, an analysis of descriptive statistics is presented.

4.1 Descriptive Statistics:

There are following show the and measured the

descriptive statistics
Table 1 Descriptive Statistics
RSDTL

ROE

RLDTL

RLDTEC

RECTL

DLQR

Mean

-0.18916

0.016618

0.896189

0.144168

10.67074

1700.12

Median

0.0565

0.010482

0.94603

0.102741

7.095278

864.1811

Maximu
m
Minimum

0.2943

0.876547

0.986074

3.08145

328.5766

54793.36

-14.7427

0.00033

0.164925

-0.85904

-49.5771

20.03286

Std. Dev.

1.534347 0.070439

0.160243

0.335565

29.01641

5059.506

Table 1 provides the descriptive statistics for all the variables. It shows 155
the number of observations of all variables, their Mean values and Median
and their standard deviation. It shows the minimum and maximum values as
well which can be attained by these variables. The descriptive statistics show
that all the variables have 155 observations. The dependent variable returns
on Equity have the Mean value of 0.016618 and Median value 0.010482. It
has a minimum value of 0.00033. And a maximum value of 0.876547. The
standard deviation for return on equity is 0.070439.

To check the working capital investment policy of these Banks, RSDTL is

included, it has Mean Value of 0.18916 and its the Median value is 0.0565.
Minimum value of RSDTL is 0.0.0565. And its maximum value is 0. 0.2943. To
check the financing policy adopted by the selected financial sector for the
management of working capital and its relationship with profitability, Long
term debt to total Liabilities (RLDTL) is used. It has a Mean value of 0.896189
and its median value0.94603. While the standard deviation of0.160243. The
minimum value for RLDTL is 0.164925 and the maximum value for it is
0.986074. The independent variable Ratio long term debt to total Equity
(RLDTEC) has a maximum value of3.08145 and a minimum value of
-0.85904. It has a Mean value of 0.144168 and its Median value is0.102741.
While standard deviation of 0.335565. To determine the firm size and its
impact on working capital management, Ratio equity capital to total liability
(RECTL) is included. Mean value of this variable is 10.67074 and its median
value is 7.095278.The maximum value for (RECTL) is 328.5766 and the
minimum value for this is -49.5771.It has a standard deviation of 29.01641.
To check the leverage of these firms,

(DLQR) is used. It has the Mean value

of 1700.12 and its Median value is864.1811.

While standard deviation of

5059.506.The minimum value is 20.03286for (DLQR) and its maximum value

is 54793.36.

4.2 Correlation Analysis:

There are following table show and measured the correlation
analysis of the dependent and independent variables. In this table use the different variables.
Such as ( RSDTL),(ROE),(RLDTL) (RLDTEC),(RECTEL).(DLQR)

Table No. 2
RSDTL

ROE

correlation Analysis
RLDTL

RLDTEC

RECTL

DLQR

RSDTL

ROE

0.0323

RLDTL

0.019451

-0.08572

RLDTEC

-0.01096

-0.88463

0.105642

RECTL

0.010764

0.054056

0.084504

-0.06639

DLQR

-0.04548

0.013268

0.0208

-0.05725

0.512138

Correlation analysis explains the relationship between two variables. It shows

change in one variable because of any change in other variable. Table 2
shows the correlation analysis. This analysis helps to locate the relationship
that exists among the independent or illustrative variables. It means the
occurrence of mutli-colinearity among the independent variables. Multi-co
linearity can influence the results, so a good model should not have any
multi-nonlinearity among the analysts. First of all correlation between
dependent variable which is return on Equity (ROE) and independent variable
Ratio of short term debt to Total liability (RSDTL), is analyzed. The results of
correlation analysis show a positive correlation between them having a value
of 0.0323. This correlation indicates that these two variables have a positive
relationship with each other i.e. if there will be an increase in ratio of short
term debt to total liability then the dependent variable return on equity will
also increase and vice versa. Return on Equity (ROE) has a negative
correlation with independent variable ratio of long term debt to total liability

(RLDTL). The value of this correlation is a 0.08572 having p-value . The pvalue shows the meaning of the relationship between return on equity and
ratio of long term debt to total liability at different level of significance. This
correlation is good for the study as it shows a significant relationship
between independent variable ratio of long term debt to total liability and
dependent variable return on equity. The correlation outcomes for ratio of
short term debt (RSDTL) ratio of long term debt to total liability (RLDTL) show
that they have a positive correlation of 0.019451 with each other. This means
that an increase in the value of independent variable ratio of short term debt
total liability will cause an decrease in ratio of long term debt to total liability
and vice versa. . The correlation of return on equity and long term debt to
total liability is

-0.01-96. This correlation has a negative value so this

relationship is also positive as the previous one. Ratio to short term debt to
total liability (RSDTL) and ratio of the long term debt to total equity (RLDTEC)
has a correlation value of -0.01096. The correlation results for ratio of short
term debt to total liability and long term debt to total equity of show a
negative relationship between them.
Ratio of short term debt to total liability has a positive relationship with ratio
of equity capital to total liability. The value of correlation coefficient between
them is 0.01076.

This correlation signifies that a raise in ratio of short term debt to total
liability is accompanied by an increase in ratio of equity capital to total
liability and vice versa. Correlation determines a negative relation between
ratio of short term debt and ratio of Domestic liquidity ratio (DLQR).
Correlation coefficient for these is -0.04548. Negative relation shows that an
increase in ratio of short term debt to total liability subsequently causes a
decrease in Domestic liquidity ratio DLQR). The positive relationship shows
between ratio of long term debt to total liability and ratio of long term debt
to equity capital. Correlation for this is 0.105642 having to showing positive
and significant relationship between these two variables. Correlation ratio of
long term debt to liability with ratio of equity capital to liability is 0.084504.
Ratio of long term debt to liability has an significant but positive relationship
with domestic liquidity ratio. It has a correlation is 0.0208. The negative
relationship shows between ratio of long term debt to equity capital and ratio
of equity capital to liability. Correlation for this is -0.06639.

The negative

relationship shows between the ratio of long term debt to equity capital
(RLDTEC) and domestic liquidity ratio (DLQR). Correlations show value is0.05725. The ratio of equity capital to liability and domestic liquidity ratio
have the 0.512138 correlation between them. From table 2 it is rather strong
that all the independent variables have correlation coefficient values less
than 1.

4.3 Regression Analysis:

There is following table show the and measured regression
analysis and in this table show the Return on equity is dependent variable
and other is the independent variables.
4.3 Table Regression Analysis
Dependent Variable: ROE
Method:

Panel

EGLS

(Cross-section

weights)

Variable
C
RSDTL
RLDTL
RECTL
RLDTEC
DLQR
R-squared
Adjusted Rsquared
S.E. of regression
F-statistic
Prob(F-statistic)

Coeffici
Std.
t-Statistic
ent
Error
-0.2841 0.0788
-3.6032
-0.0207 0.0491
-0.4213
0.7218 0.0811
8.8977
-0.3991 0.1840
-2.1692
-0.0448 0.0010
-45.1255
0.0000 0.0000
-0.7293
0.9637
Mean dependent var
0.9528
S.D. dependent var
0.4345

Sum squared resid

87.9973
0.0000

Durbin-Watson stat

Prob.
0.0005
0.6743
0.0000
0.0321
0.0000
0.4673
0.4174
2.2285
21.898
9
1.7225

Table 4.3 determines the results of different variables. At less than zero level
of importance, ratio of short term debt to total liability appears to be
important in this Table. Ratio of long term debt to total liability is also major
in this model but its importance level is 1%.All of the three control variables
i.e. Ratio of equity capital to total liability, ratio of long term debt to total
equity capital and domestic liquidity ratio are significant in the in the above

table . They do not cause any significant change in the independent variable.
The significance of use all the variable shows its correlation with the
dependent variable, return on Equity. These are predictors affect the
independent variable. A change in any of them will definitely cause some
change in dependent variable. The -coefficient of ratio of short term debt to
total liability (RSDTL) is -0.0207, which shows that if there is an increase of 1
unit in RSDTL will lead to a decrease of 0.027 units in ROE. So, there is
negative relationship between them. There is

an inverse relationship of

RSDTL with the dependent variable Similarly the -coefficient of ratio of long
term debt to total liability(RLDTL) is 0.7218. This coefficient with positive
sign shows an positive relationship of RLDTL with the independent variable.
This can be interpreted as an increase of 1 unit in RLDTL will lead to a
increase of 0.7218 units in ROE. Ratio of equity capital to total liabilities
(RECTL) has -coefficient of -0.3991, which determines a negative relation
between RECTL and ROE. But this relationship is significant. Coefficient Ratio
of long term debt to total equity capital (RLDTEC) of having a value of
-0.0448 signifies an negative relationship between RLDTEC and return on
Equity. Here again the relationship is negative relationship between the
(RLDTEC) return on equity. Domestic liquidity ratio has an positive and
significant relationship with return on Equity with coefficient 0.0000.
The value of R-square for 0.9637 and the value of Adjusted R squared is
0.9528 and value of the F. statistics is 87.9973 and in this showing the
different value T.

Statistics of all variable constant return on equity is

dependent variable value is -3.6032 there is negative relationship between

the independent and dependent variables. The t statistics value of the ratio
of short term debt to liability is.-0.4213 and std. error value is 0.0491 and the
Probability value is 0.6743 and this show the insignificance level. Similarly
the value of ratio of long term debt to total liability is 8.8977 and std, error
value is 0.0811 and the probability value is 0.0000. The ratio of equity
capital to total liability is the t. statistics -2.1692 and std. error value0.1840

and the probability value is 0.0321 and this show the significance level. The
ratio of long term debt to equity capital is the t. statistics value is -45.1255
and the std. error value is 0.0010 and probability value is 0.0000 and this is
significance level. After this value the next variable is domestic liquidity ratio
the t. statistics value is -0.7293 and the std. error value is 0.0000 and
probability value is 0.4673 and this show the significance level. In this table
the Mean dependent variable then value is 0.4174

and the S.D dependent

variables value is 2.2285 and the last value in this table are showing and
measured Durbin Watson stat value is 1.7225.

5. Conclusion:
The Capital structure is one of the most important financial
decisions of a financial sector such as banks. Effective level of Capital
structure should be present for flat running of business nevertheless of the
environment of business. From this study, it is concluded that keeping
effective level of capital is very important for financial sector as well
corresponding all other sectors of business.
The present study contains 31 banks or firms of Pakistan for a time extent of
five years from 2008 to 2012. It discovers the role of effective capital
structure in producing profitability through two main policies of capital
structure namely

capital financing policy. The financing policy is concerned

round the managing of current liabilities such as the short term debt.
In destructive capital structure financing policy more current liabilities is
using than long-term debts and iniquity for conventional financing policy. The
results of this study show that conventional financing policy also results in
more effectiveness. Moreover, the results show that the positive and

negative relation between in the descriptive statistics and the correlation and
the regression analysis.
In this research paper I can also the different research paper and find out the
different result. The discoveries of this study a very helpful for the financial
managers of the financial sector such as mostly banks. These sectors deliver
the information concerning the management of short-term capital and also
inform them about the managing strategies used by their nobles. This
evidence is useful for keeping a strong competition and successful own
organization. Ultimately it is mentioned that the managers should effort to
create good relation between Equity capital and liabilities of the firm, which
demonstrates, there is a significant relationship between the different
variable are using in this sector. Positive and significant relations are creating
between degree of opposition of financing policy of capital structure and
effectiveness of financial sector of Pakistan. The results show a negative and
significant relationship of effectiveness with unit of violence of capital
financing policy and using the different variables.

But to cover all the extents and to include all the variables is just not
possible. So, the results probable from this study should be estimated kept in
mind that there could be many other variables as well also the variables
stated above, that can describe

capital structure and effectiveness

correlation and this study is incomplete only to the effect of selected

variables in determine the effectiveness of

capital structure. Another

limitation of the projected study is that the data are using of only 5 years due
to the check of absence of obtainability of data. This study has the
consequence for financial sector only. These are variables can be used such
as short term debt, long term liabilities , return on equity and equity capital
and cash, reserve etc. Financial sector is nominated for this study; future
research can also be done for other sectors such as the chemical sector and
the others. Research can also be made on chemical and textile sector which
unknown with respect to capital structure. This study accomplishes that
violence of capital structure policies is inversely related to effectiveness. This
indicates that the financial managers of financial sector should monitor
conventional financing policy of

capital structure i.e. they should invest

more of their financial resources

long term debts as compared to current

liabilities and others.