The Impact of Capital Structure on Firm’s Profitability in Nigeria (A Case Of Listed Manufacturing Firms On The Nigerian Stock Exchange):- Umezinwa, Chijindu J.

ABSTRACT

Capital structure in finance term means the way a firm finances his assets across the blend of debt, equity or hybrid securities (Saad, 2010). Funding combination is the most important issue for'manufacturing firms while they know the amount of capital required. Firms should be careful regarding the appliance of financial providing methods compatible with the investment strategy of their firm and profitability. This study seeks to examine the relationship between capital structure and firm's profitability and the impact it has on it. For this purpose, 10 manufacturing companies have been selected randomly as study samples and the financial statements and. annual reports was gathered from the period of 2008- 2012. In the study, debt ratio, equity ratio, reserves and profitability ratio were calculated using their respective formulas and were used as indicators of capital structure and profitability respectively. Results showed that there was a significant relationship between reserves and firm’s profitability while debt financing and equity financing had no significant relationship which means that the manufacturing companies have established a pecking order theory and the use of reserves (internal funding) will lead to more profitability.