Determinants of capital structure of small and medium enterprises in the Buffalo City Municipality Eastern Cape Province South Africa
- Authors: Rungani, Ellen Chenesai
- Date: 2009
- Subjects: Debt-to-equity ratio , Capital , Value , Business enterprises -- South Africa -- Eastern Cape , Small business -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Masters , M Com (Business Management)
- Identifier: vital:11317 , http://hdl.handle.net/10353/271 , Debt-to-equity ratio , Capital , Value , Business enterprises -- South Africa -- Eastern Cape , Small business -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape
- Description: This study investigated the determinants of capital structure of small and medium enterprises (SMEs) in the Buffalo city municipality in the Eastern Cape Province of South Africa. The objectives of the study were, to ascertain whether the use of internal equity (retained profits) was positively or negatively related to the size, age and profitability of the firm. Furthermore the study examined if the use of external equity (capital from owners) was negatively or positively related to the age, size and profitability of the firm. Finally the study wanted to establish if the use of debt was positively or negatively related to the size, age and profitability of the firm. To achieve these objectives, the study hypothesised that age, size and profitability amongst other factors were determinants of capital structure. The study further hypothesised that the use of retained profits by SMEs was negatively related with age, size and profitability of the firm. Furthermore the study hypothesised that the use of external equity by SMEs was negatively related with age, size and profitability of the firm. Finally, the study hypothesised that the use of debt by SMEs was negatively related to the size, age and profitability of the firm. The results revealed that size, age and profitability of the firm were some of the major determinants of capital structure. Finally, the study recommended that SMEs, commercial banks and the South African government take measures to improve access to capital by SMEs. Such measures included government intervention in reducing discrimination from the banks as well as encouragement of SMEs training and education so that they are empowered with business and financial management skills.
- Full Text:
- Date Issued: 2009
- Authors: Rungani, Ellen Chenesai
- Date: 2009
- Subjects: Debt-to-equity ratio , Capital , Value , Business enterprises -- South Africa -- Eastern Cape , Small business -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Masters , M Com (Business Management)
- Identifier: vital:11317 , http://hdl.handle.net/10353/271 , Debt-to-equity ratio , Capital , Value , Business enterprises -- South Africa -- Eastern Cape , Small business -- South Africa -- Eastern Cape , Municipal government -- South Africa -- Eastern Cape
- Description: This study investigated the determinants of capital structure of small and medium enterprises (SMEs) in the Buffalo city municipality in the Eastern Cape Province of South Africa. The objectives of the study were, to ascertain whether the use of internal equity (retained profits) was positively or negatively related to the size, age and profitability of the firm. Furthermore the study examined if the use of external equity (capital from owners) was negatively or positively related to the age, size and profitability of the firm. Finally the study wanted to establish if the use of debt was positively or negatively related to the size, age and profitability of the firm. To achieve these objectives, the study hypothesised that age, size and profitability amongst other factors were determinants of capital structure. The study further hypothesised that the use of retained profits by SMEs was negatively related with age, size and profitability of the firm. Furthermore the study hypothesised that the use of external equity by SMEs was negatively related with age, size and profitability of the firm. Finally, the study hypothesised that the use of debt by SMEs was negatively related to the size, age and profitability of the firm. The results revealed that size, age and profitability of the firm were some of the major determinants of capital structure. Finally, the study recommended that SMEs, commercial banks and the South African government take measures to improve access to capital by SMEs. Such measures included government intervention in reducing discrimination from the banks as well as encouragement of SMEs training and education so that they are empowered with business and financial management skills.
- Full Text:
- Date Issued: 2009
Size and other determinants of capital structure in South African manufacturing listed companies
- Authors: Mgudlwa, Nosipho
- Date: 2009
- Subjects: Capital management and capital structure , Capital , Corporations -- South Africa -- Finance , Business enterprises
- Language: English
- Type: Thesis , Masters , MTech
- Identifier: vital:8941 , http://hdl.handle.net/10948/1192 , Capital management and capital structure , Capital , Corporations -- South Africa -- Finance , Business enterprises
- Description: The importance of the capital structure as a measure of company growth and performance has been at the core of vigorous debate for many years. With the threat of the recession and global competitiveness to the survival of organizations, what constitutes an optimal capital structure had to be interrogated. The focus of the study is to investigate the factors (with more emphasis on size) that influence the capital structure of manufacturing firms in general and South African manufacturing firms in particular. The aim is to advance recommendations on policy formulation so as to improve the financial performance of the manufacturing sector in South Africa, a developing economy. The study is explained within the theoretical framework which relates elements purported to have an influence on the capital structure to the use of leverage/debt by organizations. Leverage is seen to increase the shareholders‟ interest whilst being exposed to financial risk. The size of the organizations as a comparative element defines the extent of accessing the borrowed funds, hence the distinction between the Small, Medium and Micro Enterprises (SMMEs) and large sized enterprises (LSEs). The research evidence indicates that SMMEs are characterized by lower liquidity, use more short-term debt instead of use of long-term debt, and are generally low in debt and basically capital intensive. On the contrary LSEs are highly leveraged. The selected research design is triangulated, with a combination of a case study which is of a qualitative and interpretive nature, as well as a quantitative type survey by means of a structured questionnaire. Twenty five ratios were computed from information derived from the financial statements of organizations and means and medians were determined for comparative reasons. The questions were directed to chief financial officers or managers responsible for the compilation of the financial statements, mainly to expand on the debt policy of iv their respective organizations. The findings confirmed the correlation between gearing and size, asset structure and growth with the exception of profitability. On the relevance of financial policy regarding debt, two factors were proven to be influential to capital structure decisions: the theory and practice of capital structure and the impact of the debt policy, both of which relate to financial flexibility. The study concluded that as much as there are similarities/consistencies between the two size groups, there are fundamental differences confirming that size significantly impacts on the capital structure choice specifically the use of debt. It is, therefore, recommended that the South African government should review its policies with regards to the financial support towards SMME viability.
- Full Text:
- Date Issued: 2009
- Authors: Mgudlwa, Nosipho
- Date: 2009
- Subjects: Capital management and capital structure , Capital , Corporations -- South Africa -- Finance , Business enterprises
- Language: English
- Type: Thesis , Masters , MTech
- Identifier: vital:8941 , http://hdl.handle.net/10948/1192 , Capital management and capital structure , Capital , Corporations -- South Africa -- Finance , Business enterprises
- Description: The importance of the capital structure as a measure of company growth and performance has been at the core of vigorous debate for many years. With the threat of the recession and global competitiveness to the survival of organizations, what constitutes an optimal capital structure had to be interrogated. The focus of the study is to investigate the factors (with more emphasis on size) that influence the capital structure of manufacturing firms in general and South African manufacturing firms in particular. The aim is to advance recommendations on policy formulation so as to improve the financial performance of the manufacturing sector in South Africa, a developing economy. The study is explained within the theoretical framework which relates elements purported to have an influence on the capital structure to the use of leverage/debt by organizations. Leverage is seen to increase the shareholders‟ interest whilst being exposed to financial risk. The size of the organizations as a comparative element defines the extent of accessing the borrowed funds, hence the distinction between the Small, Medium and Micro Enterprises (SMMEs) and large sized enterprises (LSEs). The research evidence indicates that SMMEs are characterized by lower liquidity, use more short-term debt instead of use of long-term debt, and are generally low in debt and basically capital intensive. On the contrary LSEs are highly leveraged. The selected research design is triangulated, with a combination of a case study which is of a qualitative and interpretive nature, as well as a quantitative type survey by means of a structured questionnaire. Twenty five ratios were computed from information derived from the financial statements of organizations and means and medians were determined for comparative reasons. The questions were directed to chief financial officers or managers responsible for the compilation of the financial statements, mainly to expand on the debt policy of iv their respective organizations. The findings confirmed the correlation between gearing and size, asset structure and growth with the exception of profitability. On the relevance of financial policy regarding debt, two factors were proven to be influential to capital structure decisions: the theory and practice of capital structure and the impact of the debt policy, both of which relate to financial flexibility. The study concluded that as much as there are similarities/consistencies between the two size groups, there are fundamental differences confirming that size significantly impacts on the capital structure choice specifically the use of debt. It is, therefore, recommended that the South African government should review its policies with regards to the financial support towards SMME viability.
- Full Text:
- Date Issued: 2009
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