Research Methodology
In this project, twenty companies are included. Debt to equity ratio, net profit margin,
return on assets, return on equity, cash to total assets ratio, and WACB variables are used in the
analysis. Initially, descriptive analysis performed. Where mean, median, minimum, maximum,
standard deviation, and some other measures are calculated. Correlation analysis also performed
to check the independent variables whether they are correlated or not. For example gross profit
margin and net profit margin are related with each other, therefore, to overcome the issue of
multicollinearity gross profit margin is dropped from the regression analysis.
Finally regression analysis is performed, where it is checked which variables are
significantly related with the debt to equity ratio. From the regression analysis it is observed that
return on equity is negatively and significantly related with the debt to equity ratio. Coefficient
signs of all other variables are positive but they are not significant at all. It is also important to
mention that adjusted R square value is 72% which shows a great portion of variation is explained
by the independent variables. It is also pertinent to mention that Durban Watson stat is 2.052,
which shows there is not a problem of auto correlation.