Capital structure and financial performance of small medium enterprises in Mbarara district a case study of Biharwe division
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Date
2016-05
Authors
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Publisher
Kampala international international: College of Economics and Management
Abstract
The purpose of this study was to establish the relationship between capital structure and financial performance of Medium sized enterprises in Uganda. This study was prompted by the continued poor performance coupled with closure of several small and medium enterprises in Uganda under the debt burden as was noted in the business power section of the daily monitor on 25th September 2010. Focus was placed on the relationship between capital structures, cost of capital and loan covenants on financial performance of Medium Sized Enterprises. The objectives of the study was to examine the relationship between capital structure and financial performance of Medium sized Enterprises in Uganda, to examine the relationship between capital structure, cost of capital and loan covenants of Medium sized Enterprises in Uganda and to examine the impact of capital structure, cost of capital and loan covenants on financial performance of Medium sized Enterprises in Uganda. The study was cross sectional in nature which aided in the sampling and collection of data. Empirical data on capital structure and financial performance was analyzed using SPSS and MS-Excel to establish relationships between the variables selected for the study. Pearson's correlation coefficient will determine and Regression analysis was also used to determine the impact of capital structure, cost of capital and loan covenants on financial performance of Medium Sized Enterprises. Using various measures of financial performance, results to indicate that capital structure influences financial performance, although not exclusively. The results obtained will reveal weather that capital structure, is negatively affecting financial performance of Medium Sized Enterprises. This will suggests that agency issues may lead to Medium Sized Enterprises pursuing high debt policy, thus resulting in lower performance. Medium Sized Enterprises should therefore consider increasing equity in their capital structure through capital raising ventures like private placement of shares so as to reduce on the over reliance on debt. This will help in minimizing the cost of debt thereby enhancing profitability
Description
A dissertation submitted to the school of economics and management, department of accounting and finance in partial fulfillment for the award of bachelor’s degree of business administration at Kampala international university
Keywords
Business administration, Capital structure, Financial performance, Small medium enterprises, Bihbarwe, Mbarara district