The (iv) short term financial management (

The present study examines the
determinants of capital structure and financing practices in Food and Beverages
industry in India. 
The reference period for this study ranges from 1991 to 2008.  The
analysis is carried out by using ratio analysis, t-test F-test and multiple
regression analysis.  The results offer that though both the Debt to
Equity 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 Food
and Beverages industry.  The analysis brings out that out of eight
variables under study two (namely cost of borrowings and profitability) have
negative influence on debt equity ratio and the rest have positive influence.
Size of firms NDTS, collateral value and liquidity have positive influence on
total debt ratio.

1.  Backdrop

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Traditionally the focus of financial
management was on certain more important events like formation of a business
firm, issue of capital, merger, expansions etc. and the approach towards
financial management was outside looking. In this phase greater emphasis was
placed on the day-to-day problems encountered by financial managers and the
focus was on working capital management, financial analysis, planning and
control of the financial management. The modern phase of the financial
management which began in the mid 1950’s witnessed significant developments in
terms of theory, concepts, financial products, and quantitative methods of
analysis. The main concern of modern phase of financial management is to
maximize the wealth of current shareholders by a judicious matching of funds to
their uses. The modern-day finance manager is instrumental to a company’s
success. 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) to
decide percentage of earnings to be paid to stock  holders  in
cash  dividend  and stock dividend (dividend decision); and (iv)
short term financial management ( known as working capital management).

One of the major decisions of the
finance managers of a firm is financing decision. In this decision the finance
manager is concerned with determining the requirements of funds and the best
financing mix. A firm may decide to finance its investment requirements through
either equity only or through debt only or a mixture of both. Normally a firm
follows the third option. Consequently, the balance sheet of the firm contains
both equity and debt as sources of funds. The challenge before the economists
or the researchers in finance is to determine the optimal mix of equity and
debt that a firm should ideally have. The capital structure puzzle is yet to be
solved. Researchers in the area of finance are still struggling to develop a
universally acceptable model that would help firms in designing their target capital
structure.

The advent of liberalization,
globalization and privatization of  Indian economy since 1991, has brought
in several challenges, threats and opportunities before the managers of
business enterprises in India.
Investment opportunities have expanded, competition has heightened, financing
options have widened and, above all, dependence on capital market has
increased. In view of emerging business environment, it is essential for
finance managers of various firms to appraise and review the prevailing
financial policies so as to identify the major issues requiring immediate
attention. In this paper, an attempt is made to analyse financial management in
India
with reference to ‘Food and Beverages’.