The (iv) short term financial management (

The present study examines thedeterminants of capital structure and financing practices in Food and Beveragesindustry in India. The reference period for this study ranges from 1991 to 2008.  Theanalysis is carried out by using ratio analysis, t-test F-test and multipleregression analysis.  The results offer that though both the Debt toEquity Ratio and Total Debt to Total Assets Ratio have declined over the years,but still borrowings form an important part in the capital structure of Foodand Beverages industry.

  The analysis brings out that out of eightvariables under study two (namely cost of borrowings and profitability) havenegative influence on debt equity ratio and the rest have positive influence.Size of firms NDTS, collateral value and liquidity have positive influence ontotal debt ratio.1.  BackdropTraditionally the focus of financialmanagement was on certain more important events like formation of a businessfirm, issue of capital, merger, expansions etc. and the approach towardsfinancial management was outside looking. In this phase greater emphasis wasplaced on the day-to-day problems encountered by financial managers and thefocus was on working capital management, financial analysis, planning andcontrol of the financial management. The modern phase of the financialmanagement which began in the mid 1950’s witnessed significant developments interms of theory, concepts, financial products, and quantitative methods ofanalysis. The main concern of modern phase of financial management is tomaximize the wealth of current shareholders by a judicious matching of funds totheir uses.

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The modern-day finance manager is instrumental to a company’ssuccess. In broader sense his functions today includes (i) to identify,evaluate, and implement investment projects (capital budgeting decision); (ii)determining the best financial mix (capital structure decision); (iii) todecide percentage of earnings to be paid to stock  holders  incash  dividend  and stock dividend (dividend decision); and (iv)short term financial management ( known as working capital management). One of the major decisions of thefinance managers of a firm is financing decision.

In this decision the financemanager is concerned with determining the requirements of funds and the bestfinancing mix. A firm may decide to finance its investment requirements througheither equity only or through debt only or a mixture of both. Normally a firmfollows the third option.

Consequently, the balance sheet of the firm containsboth equity and debt as sources of funds. The challenge before the economistsor the researchers in finance is to determine the optimal mix of equity anddebt that a firm should ideally have. The capital structure puzzle is yet to besolved. Researchers in the area of finance are still struggling to develop auniversally acceptable model that would help firms in designing their target capitalstructure.The advent of liberalization,globalization and privatization of  Indian economy since 1991, has broughtin several challenges, threats and opportunities before the managers ofbusiness enterprises in India.

Investment opportunities have expanded, competition has heightened, financingoptions have widened and, above all, dependence on capital market hasincreased. In view of emerging business environment, it is essential forfinance managers of various firms to appraise and review the prevailingfinancial policies so as to identify the major issues requiring immediateattention. In this paper, an attempt is made to analyse financial management inIndiawith reference to ‘Food and Beverages’. 


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