A Nexus between Capital Structure, Inventory and Firm Performance: A Study of Leading Indian Automobile Sector

The automobile sector is one of the most and growing and contributing sectors to the Indian economy. The Indian automobile sector companies' fund's composition and their velocity of operational activities or manufacturing velocity are significantly different. There are absolute and relational differences that have been seen in the context of their resources and their composition and frequency of utilization of the resources in the leading companies of the Indian automobile sector. The study considers the capital structure, inventory turnover, and its impact on the financial performance of the Indian automobile sector companies. The pooled regression, panel fixed, and random-effects models were applied to analyze the impact of capital structure and inventory turnover data on the financial performance of the Indian automobile sector companies for the period 2012 to 2020. The study considers the panel results with fixed and random effects in two models with ROA (return on assets) and ROCE (return on capital employed) as dependent variables. The study extracted the negative relationship between the D/E (debt -equity) ratio and financial performance while the positive relationship between the assets turnover ratio and the financial performance of the Indian automobile companies. The study is fruitful for the finance manager in defining the optimum capital structure in the Indian automobile sector and production manager in the optimization of the inventory.