THE FINANCIAL STRUCTURE INFLUENCE ON NET PROFIT

Abstract

Financial structure is one of the most complex areas of financial decision making due to its interrelationship with other financial decisions variables. Decision related to financial structure is important because it directly affects the profitability of the organization. The purpose of this paper is to empirically examine the impact of capital structure on net profit for all companies active in the wholesale of motor vehicle parts and accessories in Romania (NACE 4531), with extended financial statements over a 10 years period from 2008 to 2017. In this study, the company’s financial structure, which is the independent variable, is measured by financial leverage ratio. Net profit ratio (NPR) is used as the dependent variable for the study. Used data has been analyzed by using regression analysis to find out the links between variables. The output of the study may help to the entrepreneurs, board of directors and policy makers to design better decisions in the debt-equity choice.