A panel data set of 400 manufacturing firms of Pakistan for the period of 2001 to 2014 was selected to fulfill the objectives of the study. Ordinary Least Square (OLS), fixed effect and random effect estimation methods are used in the study for analysis. The results shows that profitability, cash ratio, and age have negative impact on debt ratio while tangibility, firm size, Tobins q and business risk has positive impact. Managers of the companies should dedicate their time and energies to those variables that have significant direct link between determinants of capital structure and debt ratio with the intention of minimizing the weighted average cost of capital which in turn will maximizes the wealth of shareholders.

Muhammad Abdul Kabeer, Sofia Rafique, Afshan Khan are M Phil in Accounting & Finance, Scholars school of Accountancy and Finance, University of Lahore, Pakistan. Kabeer has an excellent understanding of the latest Accounting, Financial & Taxation concepts. Has more than seven years experience of working in a global business environment.