The impact of capital gearing on firms' performance in automotive sector listed in international market / Fatin Nabilah Ahmad Tajudin

By looking at our economic condition, financing is one of the important issues in establishing a firm. Most of entrepreneurs are worried about their liabilities especially on the combination of debts and equity incurred by the firm. Higher gearing indicates that a company has higher degree of leverage and thus the company is more responsive to the economy downturn and decline in business cycle while low gearing is more rely on equity as their sources of funds which may be indicates as preservative financial management. However the capital gearing is part of the supportive factor that may leads to the increase or decrease of the firm's performance. Therefore in order to determine the significant of the variables, this study was undertaken to further the knowledge. The primary objective of this study is to identify the impact of capital gearing on firms' performance. This research paper is based on secondary data that involve empirical evidence between different variables which consists of return on assets (ROA) as dependent variable while debt ratio (DR), debt to equity ratio (DER), time interest earned (TIE) and gearing ratio (GR) are used as independent variables. 13 companies are selected as sample from automotive sector which listed in international market. The data for this research is collected from relevant annual reports of the companies and is gathered over the period of 2012 to 2016 respectively. The results is expected that debt ratio and debt to equity ratio have negative relationship with return on assets while time interest earned and gearing ratio have positive relationship with return on assets.