EPRA International Journal of Environmental Economics, Commerce and Educational Management Journal DOI: 10.36713/epra0414 |ISI I.F Value: 0.815|SJIF Impact Factor (2023): 8.153 ISSN: 2348 – 814X Volume: 10 | Issue: 12|December 2023 ------------------------------------------------------------------------------------------------------------------------------------------------------ ---- 2023 EPRA ECEM | https://eprajournals.com/ | Journal DOI URL: https://doi.org/10.36713/epra0414 -------8 IMPACT OF FIXED ASSETS IN FIRM PROFITABILITY Lt. Dr. Varun V Varghese Assistant Professor, Postgraduate Department of Commerce, St.Paul’s College Kalamassery Address of Correspondence: St. Pauls College Kalamassery (Government Aided College) HMT Colony P.O Ernakulam 683503 Kerala Article DOI: https://doi.org/10.36713/epra15121 DOI No: 10.36713/epra15121 ABSTRACT Capital budgeting decisions are one the most important investment decisions to be made by a company. Fixed assets contribute to the major portion of capital requirement of a firm. The study tries to find weather there is any direct relationship between fixed assets and financial performance represented by firms profitability. Three models namely OLS pooled regression model, Random Effects Model and Fixed Effects model are used in the study to evaluate the impact of fixed assets on financial performance. All three models concur that there exist significant relationship between the dependent and independent variables and that financial performance is influenced by the level of investment in fixed assets KEY WORDS: Fixed Assets, Firm Profitability, Operating Margin, Fixed Assets Turnover, Foreign Exchange Rates, Interest rate, INV/COGS ratio, INTRODUCTION The association of Fixed Assets with Firm Profitability is evaluated in this study. Fixed Assets refers to the assets that are intended for a long term and money invested in this assets will be huge and will be locked in for a long period of time. In financial management these decisions comes under Capital budgeting which along with working capital management becomes Investing Decision. Firm Profitability refers to the return offered by the firm in the form of profit to its stake holders. Study shows the analytical procedure of how the two variables are related and analyses the impact of Fixed Assets on the Firm profitability of Public Sector Companies. Econometric models are used to analyse the secondary data. REVIEW OF LITERATURE Okwo Ifeoma Mary et.al (2012) assessed the impact of a company's investment in fixed assets on its operating profit margin. Though the relationship was positive, it was not statistically significant. Therefore, the result did not suggest any strong positive impact of investment in fixed assets on the operating profit. 1. Mawih (2014) examined the effects of assets structure (fixed assets and current assets) on the financial performance of some manufacturing companies. The overall result of the study was that the structure of assets did not have a strong impact on profitability in terms of ROE. Another result of the study suggested that the effect of asset structure had an impact on ROE only in petro-chemical sector. 2. Olatunji, Toyin E and Adegbite, Tajudeen (2014) examined the effect of investment in fixed assets on profitability. It also analyzed the significant components of fixed assets investment. It was found that there was a significant relationship between dependent variable (Net Profit) and the independent variables (Building, information communication and technology, machinery, leasehold, land and fixture and fitting) with the adjusted R2 @ 96%. Therefore, investments in fixed assets have strong and positive statistical impact on the profitability of companies. 3. Eniola Victoria Oluwaremi and Dr. Florence Memba (2016) reported that asset management deals with providing efficient methods of assets utilization so as to meet organizational goals such as wealth maximization, meeting customers’ needs etc. This study strived to find out the relationship between asset management and the financial performance of listed manufacturing firms. Return on Asset served as an indicator for the dependent variable of the study which is the financial performance while the indicators for the dependent variable (asset management) are fixed asset management, cash management, inventory management and accounts receivable management. The findings of the study showed that there was