Debt Financing and Firm Profitability of Manufacturing Companies in Selangor State, Malaysia.
DOI:
https://doi.org/10.53819/81018102t5251Abstract
Debt financing significantly influences the profitability of manufacturing companies in Malaysia, a nation with a robust industrial sector. While debt can be a powerful tool to fund expansion, investment in technology, and market penetration, it also introduces financial risks. The impact of debt financing on firm profitability depends on factors such as prudent debt management, macroeconomic conditions, and industry-specific considerations. To optimize profitability, manufacturing companies in Malaysia should strike a balance between leveraging debt for growth and managing the associated financial risks effectively. Findings from the study on debt financing and firm profitability of manufacturing companies in Selangor State, Malaysia indicate that these businesses rely on debt as a crucial source of capital for expansion and innovation. Prudent debt management is a key driver of enhanced profitability, while excessive debt burdens can erode profits due to high interest expenses. The impact of economic conditions and government policies further underscores the need for robust risk mitigation strategies in this dynamic economic landscape. In conclusion, the complex relationship between debt financing and firm profitability in Selangor's manufacturing sector highlights the need for a delicate balance between leveraging debt for growth while prudently managing risk. Manufacturing companies in Selangor should remain vigilant in their debt management strategies, adapt to changing economic conditions, and stay attuned to government policies and incentives to achieve and sustain profitability in this competitive economic landscape. The study recommended that manufacturing companies in Selangor should prioritize prudent debt management, regularly assessing their debt-to-equity ratios and ensuring efficient cost management to avoid excessive interest expenses. Additionally, diversifying capital sources and considering alternative financing options can reduce reliance on traditional debt financing, enhancing financial flexibility and resilience.
Keywords: Debt Financing, Firm Profitability, Manufacturing Companies, Malaysia
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