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