Chapter 1Introduction1.1 IntroductionOne of the most common ways for a company to operate or finance its assets is through capital structure. Capital structures refer to a combination of equity, debt, and hybrid securities used in the operation of the business. In a perfect market, there will be no transaction or bankruptcy costs, inefficient information and taxes. Modigliani and Miller therefore created a theory of capital structure in a perfect market. The use of capital structure is important because it affects the profitability of the company. The financial decision of a business organization becomes one of the important decisions that the capital structure will normally represent. Musiega et al. (2013) asserted that choosing an appropriate capital structure will benefit the company because it will help it adapt to various challenging and competitive business worlds, thereby becoming more profitable. According to Zeitun and Tian (2007), managers who can identify the optimal capital structure will help companies increase the company's revenue or profitability and reduce the company's financing cost. In short, the capital structure of a company can influence the profitability of the company; corporate health determined by the capital structure of the company. By analyzing the choice of firm's capital structure, a firm's financial behavior can be explained by pecking order theory and trade-off theory (Ana, Dragan, & Monica, 2012). These two theories propose a different relationship between capital structure and profitability. Based on the study of Zabri (2012), the pecking order theory provides a negative impact of profitability on leverage while the trade-off theory provides a positive relationship between capital structure and profitability. Here are some of the findings...... in the middle of the article ......o study the relationship between capital structure and profitability of the company. In order to have more clear and precise evidence of the relationship between capital structure and profitability, 24 of the companies listed on the Sarawak Kuala Lumpur Stock Exchange (KLSE), Malaysia, were chosen to test it. All financial statements of 24 companies will be recorded accurately and correctly to create an accurate test or relationship. The introduction of the research proposition will be discussed in chapter 1. In chapter 2, a literature review will be discussed on various perspectives of previous research related to our topic. The research methodology and data collection will be present in chapter 3 while chapter 4 will discuss the result and discussion of the result. A conclusion and a policy implication will be discussed in the last chapter of this study..