Assessing the Impact of Capital Structure on Profitability. A Case Study of Indian Railways Finance Corporation (IRFC)

Research Paper (postgraduate) from the year 2024 in the subject Economics - Finance, grade: A, , course: Information Systems, language: English, abstract: This study, titled "Assessing the Impact of Capital Structure on Profitability: A Case Study of Indian Railway Finance Corporation (IRFC)," aims to investigate the influence of various capital structure elements on the profitability of IRFC over 10 years. A quantitative research approach was utilized, relying on secondary data sourced from Money Control, which covered key financial indicators such as Return on Assets (ROA), Asset-to-Equity Ratio, Debt-to-Equity Ratio, and Interest Coverage Ratio. The findings suggest that IRFC’s profitability, as measured by ROA, has improved over the study period, reflecting enhanced asset utilization and operational efficiency. The analysis also indicates an increasing reliance on debt, as evidenced by a rising Asset-to-Equity Ratio, which introduces higher financial risk. Additionally, the study reveals a positive correlation between the Debt-to-Equity Ratio and profitability, implying that leveraging debt has contributed positively to profitability. The Interest Coverage Ratio, while showing a positive relationship with profitability, was found to have a statistically insignificant impact. In conclusion, the research highlights the significant role of capital structure in shaping IRFC’s profitability, underscoring the importance of strategically managing the balance between debt and equity to optimize financial performance.