Correlation between capital structures towards return on assets and firm's ability to fulfill its financial obligation
Capital structure still becomes a great issue for researcher or company. There is stillrnno definite answer about which company could perform better with certain mixture ofrndebt and equity. The main purpose of this research is to test the range of effect fromrnthe capital structure. In this research the capital structure is tested towards the returnrnon assets of a firm and the firm?s capability in paying its financial obligation. Thernresearch is trying to find the correlation between the capital structures towards thernreturn on assets and firm?s capability in paying its financial obligation with the simplernlinear regression method.rnThe findings from this research showed that statistically, there is a no correlationrnbetween the capital structure and return on assets, and there is no effect at all betweenrnthe capital structure and the firm?s capability in paying its financial obligation.rnHowever from the descriptive analysis, it showed that the capital structure only havernan effect towards certain companies with extreme mixture of debt and equity (capitalrnstructure).
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