Importance of Capital Structure in Small and Medium Enterprises: A Study on Lucky Generals

Dissertation
(To analyse the importance of capital
structure in increasing the profitability and
performance of small and medium
enterprise)

Table of Contents
INTRODUCTION...........................................................................................................................4
Overview of the topic.............................................................................................................4
Significance of the topic.........................................................................................................4
Research problem...................................................................................................................5
Research aim..........................................................................................................................5
Research objectives................................................................................................................5
Research questions.................................................................................................................6
Research rationale..................................................................................................................6
Structure of the dissertation....................................................................................................6
LITERATURE REVIEW................................................................................................................9
What is the concept of capital structure and small and medium enterprise in the context of
organisation?...........................................................................................................................9
What are the various determinants of capital structure used by Lucky generals in increasing
the profitability and performance?.......................................................................................11
What is the importance of effective capital structure in enhancing the profit and improving the
performance of Lucky generals?..........................................................................................13
The challenges faced by Lucky generals in implementing the effective capital structure for
their organisation..................................................................................................................15
RESEARCH METHODOLOGY...................................................................................................18
DATA ANALYSIS AND FINDING............................................................................................25
Frequency distribution tables...............................................................................................25
Data presentation and interpretation.....................................................................................27
DISCUSSION................................................................................................................................38
CONCLUSION..............................................................................................................................43
RECOMMENDATION.................................................................................................................44
REFERENCES..............................................................................................................................46
APPENDIX....................................................................................................................................50
Questionnaire........................................................................................................................50

INTRODUCTION
Overview of the topic
Capital structure of an organisation is considered as the mixture of two types of capital
structure such as debt and equity. This capital structure is used by the organisation in order to
manage financial decision of the organisation so that business issues can be managed. This is
essential for the organisation that to keep effective capital structure by keeping balance on its
elements so that wise finance decisions can be taken and at the same time efficient business
operations can be executed. Appropriate capital structure helps the organisation to analyse their
financial position and to examine accurate profitability so that overall wealth of the organisation
can be maximised (Hirdinis, 2019). Capital structure is referred as the proportion of money
which is invested by the organisation in different dimensions and when they are collaborated it
creates overall capital of the organisation. The current research report is related with examine the
importance of capital structure in increasing profitability and performance of small and medium
sized organisation. For small organisation their capital is needed to be managed in such a manner
that they can arrange all of their business activities. The report also highlights the challenges
which are being faced by the small and medium sized organisation while implementing effective
structure of capital in their organisation (Siqueira and et. al., 2018). The organisation taken for
the current dissertation is Lucky Generals which is associated with creating advertisement
campaign for their customers. The company is considered within small and medium sized
business sector and currently operating their business in London, UK.
Significance of the topic
The current topic is related with giving higher importance to the small and medium sized
businesses as they can get to know regarding importance of keeping efficient capital structure so
that to increase overall profitability and organisational productivity. With the help of effective
capital structure, the organisation may get to know regarding utilisation of their funds. On the
other hand, this research report is providing significant and in-depth information related with the
manner in which capital structure of the organisation can be used in order to optimise
productivity and profitability (Kao, Hodgkinson and Jaafar, 2018). The information within the
current research is of high use for financial experts as they can take various decisions for their
organisation which would be beneficial for the organisation during long term in context of

financial viability and productivity. The gathered information of the research will also help
various organisation about how they can design and develop a well structure capital for their
company. The present topic is also eye caching for those small and medium enterprise who are
struggling for the fund. With this investigation they can know what all factor is used to
determine their sources through which they can raise fund for their business operation. Thus, the
existing research topic is very much significant for the small and medium enterprises within the
UK.
Research problem
The main research problem which is identified in the present research is that small and medium
enterprises faced is deciding the right source through which they can raise fund. Due to
ineffective capital structure small and medium enterprise cannot able to raise their capital in
accurate manner. This create problem as their business operation cannot be done in appropriate
manner this affect their profit margin in large way. Having the right source to acquire capital is
very necessary as through which organisation are able to run their business function and provide
product or service to the market. This research will help them to mitigate this problem by
identifying the sources as well as overcoming the challenges faced by them while developing a
good capital structure for their company.
Research aim
To analyse the importance of capital structure in increasing the profitability and
performance of small and medium enterprise: “A study on Lucky Generals”.
Research objectives
 To understand the concept of capital structure and small and medium enterprise in the
context of organisation.
 To identify various determinants of capital structure used by Lucky generals in increasing
the profitability and performance
 To analyses the importance of effective capital structure in enhancing the profit and
improving the performance of Lucky generals
 To discern challenges faced by Lucky generals in implementing the effective capital
structure for their organisation.

Research questions
 What is the concept of capital structure and small and medium enterprise in the context of
organisation?
 What are the various determinants of capital structure used by Lucky generals in
increasing the profitability and performance?
 What is the importance of effective capital structure in enhancing the profit and
improving the performance of Lucky generals?
 What are the challenges faced by Lucky generals in implementing the effective capital
structure for their organisation?
Research rationale
The major rationale behind selection of this topic is related with gaining in-depth
information related with the topic of capital structure and its importance within small and
medium sized organisation in terms of developing profitability and performance. The current
research is related with developing knowledge of finance aspect so that using such information
Small and medium sized organisation may take advantageous decisions (Andrieu, Staglianò and
Van Der Zwan, 2018). This research also highlights the various challenges which would be
faced by the organisation while deciding the effective capital structure for their company. The
research is aimed at meeting dual perspective of the researcher such as professional and personal.
In the context of personal perspective, the research would develop different skill of researcher
such as interpersonal skills, financial reporting skills, management skills, problem solving skills
and many others. These skills will aid in completing the total dissertation in systematic manner
and with more accuracy. Besides this in the context of professional perspective the research will
develop differential skills within researcher so that in their professional career the same can be
used and career embellishment can be acquired. The various financial skill will help them when
they will be working in an organisation as a manger and using this to decide the best and
appropriate capital structure for their company. Thus, the current research is quite significant in
attaining the dual objective in effective and efficient manner.
Structure of the dissertation
Having the right structure for the dissertation is important as it tells the reader about the way
research is being completed and what all activities are being covered for completing the

investigation in systematic manner. In the current dissertation five major chapter will be included
which are demonstrated as under:
Chapter 1: Introduction: This is the first chapter within the current dissertation in which brief
information related with research topic is mentioned. Under this chapter the research problem is
also identified for which research is conducted and at the same time rationale of the research is
also mentioned. This chapter is important as in this section the aim and objective of the
investigation is included on the basis of which the overall project is being carried out.
Chapter 2: Literature review: Under this section information from different articles and books
are added so that secondary information can be added within the research and at the same time
investigation can be supported by pre-existing information over the research topic. This section
helps the investigator to gain more knowledge on the selected topic in order to conduct
investigation in sound manner. Literature review address the research question so that
investigator can attain their aim and objective as per their choice and thoughts.
Chapter 3: Research methodology: This chapter consists of using different methods so that
study can be exerted within systematic manner. This part in the dissertation will helps the
researcher to extract and accumulate important data so that aim and objective can be achieved.
This is one of the crucial part of the research in which researcher selects such methods which are
beneficial for collecting information related with research topic. In the current research, primary
and secondary data collection methods are used so that to gather information related with the
topic in apt manner. Under the dissertation random sampling method is chosen so that
quantitative methods can be adopted and research results can be acquired.
Chapter 4: Data analysis and discussion: Under this section gathered information are analysed
using different methods so that appropriate demonstrate results of the research topic. This
chapter is essential in making significant results into the research. In this research uses the data
analytical tool so that beneficiary data as per the research need can be acquired. This section then
shows the analysed data in proper format and presentation so that readers can acquires all the
useful data.
Chapter 5: Conclusion and recommendation: Under this chapter summary of the report is
mentioned so that appropriate findings can be exerted within research. This chapter holds high
degree of importance within research as this is helpful in execution of planned aspects as well.
Conclusion and recommendation chapter is very important for the researcher to write this part in

appropriate manner because this catches the eyes of the reader about the research topic in proper
way.