Exploring Debt Dynamics: The Impact of Capital Structure on Profitability in The Indian Food and Beverage Industry

This study examines the impact of Capital Structure on the Profitability of Indian Food and Beverage companies listed on the S&P BSE ‎FMCG Index. The analysis is based on a balanced panel of 40 companies, comprising 400 observations over ten years from 2013 to 2023. ‎Capital structure is represented by three measures: long-term debt to total assets (LDA), short-term debt to total assets (SDA), and total debt ‎to total assets (TDA). Profitability is measured using return on equity (ROE) and return on assets (ROA). Tangibility (TANG), firm size ‎‎(SIZE), and liquidity (LIQ) serve as control variables. Panel regression techniques using random effects and fixed effects models are ‎employed to test the hypotheses. The results reveal that all debt measures (LDA, SDA, and TDA) have a significantly negative impact on ‎ROA, whereas no significant relationship is found between debt measures and ROE. Tangibility and liquidity significantly negatively ‎impact profitability, while firm size exhibits a significant positive impact. The study contributes to the existing literature and offers practical ‎insights, emphasizing the importance of optimizing debt levels, enhancing liquidity management, and improving asset efficiency as key ‎strategies to drive profitability in Indian Food and Beverage companies‎.