Impact of Capital Structure on Profitability of HSBC Holdings

Analyse of financial capital
and financial resources HSBC
holdings of United Kingdom.

Acknowledgement
I will like to special thank my lecturer that has given me opportunities to conduct
research on study related to impact of capital structuring on profitability of organisation. At the
same time I will also thank god. Furthermore, it has helped me in doing more and more research
and gathering useful insight related to topic so that it can be used by interested parties as per their
purposes. Valuable guidance and feedback given by my lecturer has helped me in improving the
study and getting useful information related to the study.

Abstract
Capital structure has been an important aspect for consideration to maximise the profitability. A
loss making firm can make them profit making by correcting and modifying their debt-equity
ratio. In this report, the researcher has conducted both primary and secondary research to gather
response and information pertaining to the relationship between capital structure and
profitability. Also, various components forming part of capital structure has been studied by the
researcher along with the corresponding effect occurred on profits due to their inclusion in
capital of the company. The qualitative research has been done on 30 managers of HSBC
holdings to gather information in order to accomplish the objectives of the research.

TABLE OF CONTENT
CHAPTER -1 INTRODUCTION....................................................................................................5
1.1 Background.......................................................................................................................5
1.2 Aim and Objectives..........................................................................................................5
1.3 Research questions...........................................................................................................6
1.4 Rationale...........................................................................................................................6
1.5 Significance......................................................................................................................6
1.6 Dissertation structure........................................................................................................7
CHAPTER – 2 LITERATURE REVIEW.......................................................................................9
2.1 Theme 1: Concept of capital structure and its importance for organisation.....................9
2.2 Theme 2: Various forms of financial resources that are parts of capital structure........11
2.3 Theme 3 Relationship between financial resources and profitability of company........12
CHAPTER – 3 RESEARCH METHODOLOGIES......................................................................14
3.1 Research Type................................................................................................................14
3.2 Research approaches......................................................................................................14
3.3 Research Philosophy......................................................................................................15
3.4 Data collection................................................................................................................15
3.5 Validity and reliability....................................................................................................15
3.6 Research Limitation........................................................................................................16
3.7 Data analysis...................................................................................................................16
3.8 Research design..............................................................................................................17
3.9 Sampling.........................................................................................................................17
3.10 Ethical consideration....................................................................................................17
CHAPTER – 4 DATA ANALYSIS..............................................................................................18
CHAPTER- 5 RESULTS AND DISCUSSION............................................................................31
CHAPTER -6 CONCLUSION AND RECOMMENDATION.....................................................33
6.1 Summary.........................................................................................................................33
6.2 Evaluation of Results......................................................................................................33
6.3 Recommendations based on Evaluation.........................................................................34
6.4 Future Work....................................................................................................................35

CHAPTER -7 PERSONAL DEVELOPMENT.............................................................................35
REFERENCES..............................................................................................................................37
APPENDIX....................................................................................................................................39
Appendix................................................................................................................................2

Topic: To investigate the impact of capital structure on the profitability of an organisation within
financial sector of United Kingdom: A case of HSBC holdings.
CHAPTER -1 INTRODUCTION
It is chapter that has covered introduction the of dissertation, aim, objective and rationale
which helps in understanding why research was important to conduct and to whom it is fruitful.
Furthermore, it has contained detailed background of the topic or crucial points that are covered
in the dissertation so that users can easily understand and interpretate. Therefore, it can be
understood that this chapters have covered all necessary information related to impact of capital
structure over profitability of HSBC.
1.1 Background
Capital structure can be termed as company mix of capital that is debt and equity or firm
long-term capital that is used for effective operation of business. It is permanent sources of
funding that are used in various process of enterprise so that better services can be rendered to
customers. HSBC is British Multinational investment bank and financial services that was
established in London in 1991. This research is based on impact of capital structure on
profitability of HSBC holding and the way it leads to growth and success of firm (Hanna, Khor,
and Ali, 2019). It has also included necessary information related to forms of financial resources
that contributed in forming capital structure of organisation. Moreover, there is direct
relationship between financial resources and profitability of company, so manager needs to
consider the same for benefit of enterprise.
1.2 Aim and Objectives
The aim of this study is to assess the impact of capital structure over the profitability of HSBC
holding.
To develop broad understanding of the concept of capital structure and its importance
within organisational context.
To identify various forms of financial resources that form part of the capital structure.
To analyse the relationship between various financial resources and profitability of the
organisation within financial sector.
To suggest an appropriate and profitable capital structure for HSBC to enhance its
financial performance.

1.3 Research questions
 What is concept of capital structure and its importance for organisation?
 What are different form of financial resources that form part of capital structure?
 What is the relationship between financial resources and profitability of HSBC bank that
is operating in financial sector?
 What is some suggestion related to appropriate and profitable capital structure for HSBC
that contribute to enhancing overall financial performance?
1.4 Rationale
The topic “impact of capital structure on profitability of organisation that are operating
in financial sector” is important to study as it helps manager in taking correct decision.
Moreover, it can be understood that topic is crucial as it helps in understanding several sources
from which capital can be arranged and used in the organization so that end objectives can be
achieved. The research on topic is important in current scenario as manager are unable to decide
appropriate capital structure that could be helpful company in gaining competitive advantages
(Sadalia and et.al., 2019). It would be fruitful for management and companies that are operating
in financial sectors as they are able to decide appropriate capital structure and contribute to
growth and success of firm. Moreover, the research on the topic will help in getting information
related to relationship between financial resources and profitability of bank.
1.5 Significance
It can be stated that the topic of capital structure is significance as it helps in
understanding why it is crucial for organisation to effectively organized its capital structure. The
study is also fruitful in gathering relevant information related to the different sources that could
be used to gathered capital which can be used in smooth operation of business. Companies by
having sufficient financial resources can meet its expense, cost thereby delivered better services
to customers in limited time frame (Osadchy and et.al., 2018). So, overall, it can be understood
that study on impact of capital structure on organisation is significant as it will help manager in
taking right decision regarding the way capital needs to be utilized for better outcome.
1.6 Dissertation structure
This is section of introduction that specific about the sequence or process in which
dissertation will be pursued so that necessary information can be gathered and evaluated. There
are various chapters in dissertation that include significant data or information in context of topic

“impact of capital structure on profitability of HSBC bank in financial sector. So, overall it will
give brief about the several chapters that are present in the study to gathered necessary
information related to impact of capital structure.
Chapter-1 Introduction
This is an chapter which include detailed information about various points that are
covered in the dissertation so that research can be made useful. The introduction chapter has
contained aim, objectives, research question and significance of research so that users or
individual can easily understand and interpretate as per their requirement.
Chapter- 2 Literature review
It is second chapter which include review of several well-known author about the topic
so that necessary information can be derived and end information can be gathered. Therefore, it
is survey of scholar sources from journal, article and books (Robiyanto, Putra and Lako, 2019).
Chapter-3 Research methodologies
Research methodologies explained about the various method that are used by researcher
in order to collect, analysis and interpretate necessary information related to the topic of capital
structuring. It helps in understanding tool, techniques or method used by scholar in order to
complete the research in the best possible manner.
Chapter-4 Data Analysis
It is the chapter that has included key information related to the way data will be analysed
and interpreted so that interested parties or users can make use of its as per their preferences or
needs. Theme, graphs and bar charts are used in order to data analysis regarding the topic of
impact of capital structure on organization.
Chapter-5 Conclusion and recommendation
This is last chapter of dissertation that include conclusion and recommendation regarding
the topic which can be used by company in order to enhance its profitability. Thus, it can be
stated that it has contained summary of research conducted and some suggestion regarding
capital structuring that could be used by firm to grow and expand its business operation (Mendes,
2020).