DEBT OR RETAINED EARNINGS: WHICHEVER IS OPTIMUM FOR THE GROWTH OF THE FIRM

Abstract

This research paper explores the crucial question of determining the optimal capital structure for firm growth, considering the choices between debt and retained earnings. The aim is to assess how the utilization of debt and retained earnings influences the financial performance of selected Indian companies. The objectives are twofold: to analyze the capital structure choices of the companies and to evaluate the impact on performance metrics such as ROE, ROA, and EPS. The research methodology involves a comprehensive literature review, data analysis of six Indian companies, and data interpretation based on relevant theories and studies. The findings highlight industry-specific nuances and underscore the significance of empirical evidence and prudent financial analysis for capital structure decisions. The research contributes to the understanding of the relationship between capital structure and firm growth in the context of emerging markets like India. The future scope involves further industry-specific analyses and dynamic studies to guide companies towards optimized capital structure decisions for long-term success.