The primary objective of the firms is to increase their profits exponentials and to do so they need to consider and utilise different resources. Finance is one of the primary needs of an organisation that decides the performance and direction of the firm (Saeidi et al., 2015). Hence, it is of great prominence to have a balanced and sound financial performance of the organisation. Different factors are involved that ensures the financial performance of the firm is sound and balanced. To attain the discussed objective, the firms use different approaches and one of them is the capital structure. Capital structure of firm is reference to the approach that the firm adopts to finance its growth and overall operation through use of different source of fund. Capital structure is a mix of equity and debt (Zeitun & Tian, 2014). The debt comes as bond issuances or as long term notes payable. On the contrary, equity is categorised as retained earnings, common stock or preferred stock.
The discussed research is aimed at exploring the impact of capital structure on the financial performance of CSR Limited. The considered firm is an ASX listed firm that is dedicated towards market services that includes trading and price discovery, capital hedging and formation, security settlements and others. Hence the primary aim of the study is “to identify the impact of capital structure on the financial structure of CSR LIMITED”. The aim of the paper will be supported by certain research questions that have been listed below
RQ1- What is the impact of capital structure on return on assets and return on performance of CSR Limited?
RQ2- How does the capital structure influence the overall firm performance of CSR limited.
The discussion in the above section have made it evident that capital structure of a firm is the trend that decides the approach that company adopts to finance its assets through a combination of equity, debt or a combination. Certain factors that are crucial for the variables (capital structure and financial performance have been discussed.
Figure: Conceptual Framework
(Source: Created by Author using MS WORD SMARTART)
The image attached above is the conceptual framework that has presented the crucial variables that needs to be assessed to present the overall performance. The factors that are directly associated with the financial performance has also been presented.
The overall performance of the firm is one of the most crucial aspect that is taken into consideration before developing perception about the firm. The developed perception is responsible for the investment coming into the company, the customer base and many other strategic benefits of the firm (Leal-Rodriguez et al., 2015). The most crucial identifications that adds to formulate the overall performance are financial performance, customer satisfaction and resource management.
Financial performance of an organisation refers to the extend till which the organisation have achieved its financial objectives or is being accomplished (Flammer, 2015). In other terms, it can be called as the procedure for measuring the outcome of the firm’s operations and policies in context with monetary term. Different factors are used to measure the financial performance of the firm and some of the most crucial of them are EPS, ROE and ROA that stands for earning per share, return on equity and return on assets respectively (Nimtrakoon, 2015). Debt Ratio is also one of the prime components that impacts the financial performance of the firm.
Debt Ratio is one of the most crucial aspects that is taken into consideration to detail the financial performance of the firm (Charles, 2017). It is also one of the methods for measurement of the capital structure of a firm.
Financial performance of an organisation refers to the extend till which the organisation have achieved its financial objectives or is being accomplished (Flammer, 2015). The above statement could be converted to two different aspects that intends to seek out the financial establishment of the firm. The two aspects are “the firm’s financial position at an instance” and “financial position of the firm over a given period of time” (Ozkan, Cakan & Kayacan, 2017). Different methods have been established to determine the financial position one of which is use of the balance sheet. Balance sheet are used for the summary of organisational financial position at any instance. The key principal pursued by the firm is “Total assets= Total Liabilities+ Owner’s equity” (Gitman, Juchau & Flanagan, 2015). While for analysis of the financial performance of the firm within a given period of time, five variables are accounted. The variables are EPS, ROE, ROA, Tobin’s Q and MB/VR (market value to book value) (Ozkan, Cakan & Kayacan, 2017). EPS, ROE and ROA are the three most prominent variables as they are capable of evaluating the financial performance on their own (Post & Bryon, 2015). Hence, to summarise the discussion it would be justified to state that ROE, EPS and ROA are three crucial variables that can offer the financial performance of a firm and will be adopted as part of the study in discussion.
According to (Zeitun & Tian, 2014), capital structure of a firm refers to the approach that the firm adopts to finance its growth and overall operation through use of different source of fund. Several studies have been conducted on the topic and in the process different methods for accounting the capital structure have been identified. Some of the most prominent of them are “short term liability to total assets”, “total debt to total assets (debt ratio)” and “long-term liability to total assets” (Badoer & James, 2016). All of them are very efficient in their contexts, however, the most proficient and most widely used method is the debt ratio. The study in discussion will also be used in the discussed study for determining the capital structure of CSR Limited.
The relation between the capital structure and financial performance of a firm is one of the most assessed topics and from every assessment some different results have been identified. According to Maina & Ishmail (2014), some of the previous studies on the relationship between financial performance and capital structure is positive in nature while, others have claimed against the discussed theory. However, one thing that is evident from the review of the literary work is that both of the subjects (financial performance and capital structure) does shares a relationship. Another identification that is crucial from the review of the literary work is that the relationship between the two is also dependent on the market of the firm (V?tavu, 2015). The most crucial identification from the review of the literary work that is relevant to the study in discussion is that the subjects does share a relation and as there is a relationship so one will impact the other. Hence, the proposed topic is feasible and needs discussion.
The research questions of the paper are dedicated towards identification of impact of one or multiple factor over other and hence, inferential analysis will be adopted as part of the study (Raqab & Al-Mutairi, 2016). Regression test will be conducted to identify the correlation between the two variables. The performance (financial and overall depending on the research questions) will be the dependent variable while, the capital structure and the factors associated with capital structure will be the independent variable. To determine the financial performance variable, three sub-variables EPS, ROE and ROA that stands for earning per share, return on equity and return on assets respectively will be computed. For the overall performance, along with the financial performance other performances of the firm needs to be evaluated that will be done through the data collected by survey. To determine the capital structure of the firm, the study will measure the Debt ratio of the firm. The consideration of debt ratio is done because one of the methods to determine the capital structure of an organisation is the ratio between total debt and total ratio, which is debt ratio.
The data for the analysis will be collected the secondary sources that are available online and a quantitative survey on a sample size of 30. The survey will enable in understanding of the firm’s performance which will then be validated with the data that is presented by the secondary sources (Porter, Umbach & Overland Park. 2017). The population for the survey will be the capital structure and financial performance experts along with the stakeholders of CSR. The questionnaire will be developed in Google Forms and distributed electronically. The analysis of the data will be done using IBM SPSS tool and it will be stored in MS EXCEL. Post analysis of the data, the findings will be documented and presented as final report.
The table in the attached below presents the timeline of the study along with the activities that will be undertaken to deliver the project successfully. An image has also been attached below that represents the Gantt chart.
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Activities |
2018 |
2019 |
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December |
January |
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Week 2 |
Week 3 |
Week 4 |
Week 5 |
Week 6 |
Week 7 |
Week 8 |
Week 9 |
Week 10 |
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Topic Development and Establishing Background |
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Proposal Development |
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Scheduling, Budgeting and Risk assessment |
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Literature Review |
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Secondary Data Collection and Summary |
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Quantitative Data collection and Analysis |
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Summarising Findings |
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Conclusion |
Figure: Gantt Chart
(Source: Created by Author using)
https://www.csr.com.au/investor-relations-and-news/annual-meetings-and-reports
https://www.investsmart.com.au/shares/asx-csr/csr-limited/financials
Badoer, D. C., & James, C. M. (2016). The Determinants of Long?Term Corporate Debt Issuances. The Journal of Finance, 71(1), 457-492.
Charles, C. (2017). Nonprofit arts organizations: Debt ratio does not influence donations—Interest expense ratio does. The American Review of Public Administration, 0275074017724227.
Flammer, C. (2015). Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), 2549-2568.
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.
Leal-Rodríguez, A. L., Eldridge, S., Roldán, J. L., Leal-Millán, A. G., & Ortega-Gutiérrez, J. (2015). Organizational unlearning, innovation outcomes, and performance: The moderating effect of firm size. Journal of Business Research, 68(4), 803-809.
Maina, L., & Ishmail, M. (2014). Capital structure and financial performance in Kenya: Evidence from firms listed at the Nairobi Securities Exchange. International Journal of Social Sciences and Entrepreneurship, 1(11), 209-223.
Nimtrakoon, S. (2015). The relationship between intellectual capital, firms’ market value and financial performance: Empirical evidence from the ASEAN. Journal of Intellectual Capital, 16(3), 587-618.
Ozkan, N., Cakan, S., & Kayacan, M. (2017). Intellectual capital and financial performance: A study of the Turkish Banking Sector. Borsa Istanbul Review, 17(3), 190-198.
Porter, S. R., Umbach, P. D., & Overland Park, K. S. (2017). The future of college student surveys.
Post, C., & Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. Academy of Management Journal, 58(5), 1546-1571.
Raqab, M. Z., & Al-Mutairi, D. K. (2016). Inferential analysis for the reliability parameter based on the three-parameter Lindley distribution. Communications in Statistics-Theory and Methods, 45(16), 4923-4936.
Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of business research, 68(2), 341-350.
SPSS, M. O. D. (2015). SPSS (Statistical Package for the Social Sciens).
V?tavu, S. (2015). The impact of capital structure on financial performance in Romanian listed companies. Procedia Economics and Finance, 32, 1314-1322.
Zeitun, R., & Tian, G. (2014). Capital structure and corporate performance: evidence from Jordan.
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