1st ICARE Student's Conference - 2015
Permanent URI for this collectionhttp://repository.kln.ac.lk/handle/123456789/10239
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Item Capital structure and performance of Sri Lankan listed companies(Department of Accountancy, University of Kelaniya, 2015) Rajapaksha, R.M.P.W.M.Capital structure refers to the percentage of capital (money) at work in a business. There are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks. Equity Capital refers to money owned by the shareholders (owners). Typically, equity capital consists of two types contributed capital, which is the money that was originally invested in the business in exchange for shares of stock and retained earnings, which represents profits from past years that have been kept by the company. The debt capital in a company's capital structure refers to borrowed money that is at work in the business. Debt capital mainly we can categorise as Short term debt and long term debt. The firm’s ability of fulfil the needs of its stakeholders is tightly related to the firm’s financing decisions. Capital or Financial Structure decision is to find out the best mix of debts and equity that a company uses to finance its business. (Damodaran 2001) This research seeks to assess the Capital Structure and performance of the listed business companies in Sri Lanka to identify impact between the Capital Structure and Companies Performance. The analysis done using the annual financial statements of 20 business companies listed on the Colombo Stock Exchange which covers a period of five (5) years from 2009-2014. Correlation and regression analysis applied on performance indicators such as Return on Asset (ROA) and Profit Margin (PM) as well as Short-term debt to Total assets (STDTA), Long term debt to Total assets (LTDTA) and Total debt to Equity (TDE) as capital structure variables. The expected result of this study is find out the wether there is any significant impact between capital structure and performance of the firm’s and to recommend that companies should use more of equity or debt in financing their business activities to enhance the performance of the Sri Lankan Listed Companies.Item The effect of capital structure on profitability in Sri Lankan company(Department of Accountancy, University of Kelaniya, 2015) Madhubhashani, M.A.C.D.The capital structure decision is essential for any business organization. To understand how companies finance their operations, it is necessary to examine the determinants of their financing or capital structure decisions. Weston and Bringham (1978) define capital structure as the permanent financing of the firm represented by long-term debt plus preferred stock and net worth. Capital structure decision is the vital one since the profitability of an enterprise is directly affected by such decision. The successful selection and use of capital is one of the key elements of the firms’ financial strategy (Velnampy & Aloy Niresh, 2012). This paper seeks to investigate the relationship between capital structure and profitability of listed companies on the Colombo Stock Exchange (CSE) during a five-year period. In order to meet the objectives of the study, data will collect from secondary sources mainly from financial report of the selected companies and regression analysis is used as the methodology in this paper. Variables used for the analysis include profitability and leverage, equity ratios. Profitability measured by Return on Assets (ROA). Expected outcome of this paper is to develop a theory relating to the capital structure and profitability based on the Sri Lankan Context.Item Effect of capital structure on company performance in Sri Lanka(Department of Accountancy, University of Kelaniya, 2015) Abeyrathne, A.H.M.U.S.The objective of all financing decisions is wealth maximization and the immediate way of measuring the quality of any financing decision is to examine the effect of such a decision on the company’s performance. Capital structure is a financial tool that helps to determine ‘how do firms choose their capital structure?’ a firms capital structure is then the composition or structure of its liabilities. Therefore managers need to take decision very carefully regarding to the capital structure of company. Capital structure is defined as the relation between the debt and equity that is used to finance firm’s assets (Moyer 2001, McMenamin 1999). The choice of a capital structure of a firm can equally be viewed from the management and the ownership structure of the company (Du and Dai, 2002). Pindado and Torre (2004) posit that the capital structure of a firm is determined by the incentives and goals of those who are in control of the firm. Capital structure decision is the mix of debt and equity that a company uses to finance its business (Damodaran, 2001). The objective of this research is that investigates how the capital structure affects the company’s performance. The research is focusing on Impact of capital structure listed companies in Colombo Stock Exchange Market according to the variable and the study base on secondary data. The data are collected from published annual reports on individual companies, Colombo Stock Exchange books, Colombo Stock Exchange journals and magazines. The sample for this study is taken from 10 firms. The sample period is 10 years ranging between 2005 and 2015 and it is ensured that each of the firms has data for at least five years during this period under study. The method of data analysis use in this research work is the descriptive, correlation and regression technique. The data is on the key variables: ROI, ROA, debt-equity ratio, long term debt to capital employed ratio, total debt ratio and age. An exercise is carried out in this respect using debt-equity ratio, long term debt to capital employed ratio, total debt and age as Independent variable while using ROI and ROA as Dependent variables. Expecting findings are capital structure is significantly impact on company performance and capital structure measures are negatively related to firm performance.