Impact of Capital Structure on Financial Performance of UK SMEs

Dissertation
( Impact of Capital structure and its
determinants on the financial performance
of the UK Small and medium enterprise )

Table of Contents
Introduction......................................................................................................................................3
Overview of the topic..................................................................................................................3
Research aim...............................................................................................................................3
Research objectives.....................................................................................................................3
Research question........................................................................................................................4
Significance of the topic..............................................................................................................4
LITERATURE REVIEW................................................................................................................5
The conceptual framework of capital structure in the context of organisational performance...5
The various determinants of capital structure in improving financial performance of small and
medium enterprise.......................................................................................................................7
REFERENCES..............................................................................................................................10
Books and journal.....................................................................................................................10

Introduction
Overview of the topic
Capital structure is the mixture of two vital elements that are equity and debt. It is used
by the company to raise fund for their overall operations and growth. Equity capital is raise
when the right of ownership share is granted to the person. This type of capital is also claims as
the future capital of the company. On the other side, Debt capital is defined as the capital which
is raise by issuing the bonds or loans (D’Amato, 2020). In a very short language, capital
structure is the combination of long term debts, short term debts and stock. Different industry
uses various types of capital structure as per their need and wants. Types of capital structure that
can be used by the organisation are Equity capital structure, Optimal capital structure, Financial
leverage structure, debt capital structure and many more. One of the important role of effective
capital structure is that it helps in managing the financial decision of the company. It also helps
in generating higher profit and financial performance can be improved (Hernández, Yañez-
Araque and Moreno-García, 2020). So it is very essential for the companies to keep the best
capital structure in order to balance their productivity and performance.
To carry out the investigation on the impact of capital structure on financial performance
the chosen sector is small and medium enterprise. A small enterprise is one where 10 to 50
employees are working and medium enterprise is one where 50- 250 employee works. For small
and medium enterprise having a effective capital structure is very important because it helps
them to allocate fund for their day to day operations (Eggers, 2020).
Research aim
To analysis the impact of Capital structure and its determinants on the financial performance of
the UK Small and medium enterprise
Research objectives
 To understand the conceptual framework of capital structure in the context of
organisational performance
 To analyse the various determinants of capital structure in improving financial
performance of small and medium enterprise

 To identify impact of Capital structure and its determinants on the financial performance
of the UK Small and medium enterprise
Research question
 What is the conceptual framework of capital structure in the context of organisational
performance?
 What are the various determinants of capital structure in improving financial performance
of small and medium enterprise?
 What is the impact of Capital structure and its determinants on the financial performance
of the UK Small and medium enterprise?
Significance of the topic
The present research study is related to give higher significance to small and medium
enterprise of UK. The topic is chosen so that they can know the importance of having effective
capital structure for the organisation (Dakua, 2019). Choosing the right type of capital structure
helps the SME's to increases the organisational profitability and productivity. Using the best
capital structure for the organisation assist the company in allocating and utilising the fund in
best manner. Apart from this the current investigation also provide in depth information
regarding the way the capital structure of the company can be used (Eller and et. al, 2020).