BUSN20019 - Capital Structure Impact on CSR Limited Performance

This report investigates the impact of capital structure on the financial performance of CSR Limited, an ASX-listed firm. It examines the relationship between capital structure, measured by debt ratio, and financial performance, assessed through metrics like Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS). The study reviews existing literature, noting mixed findings on the relationship between capital structure and financial performance, and proposes a research plan involving inferential analysis using regression tests. Data will be collected from secondary sources and a quantitative survey of capital structure and financial performance experts and CSR stakeholders. The analysis will be conducted using IBM SPSS, with findings presented in a final report. The research aims to determine how capital structure influences both return on assets and overall firm performance of CSR Limited.

Running head: IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR
LIMITED
Name of the Student
Name of the University
Author Note

1IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
Table of Contents
Introduction................................................................................................................................2
Framework.................................................................................................................................2
Overall Performance..............................................................................................................3
Financial Performance...........................................................................................................4
Debt Ratio..............................................................................................................................4
Literature Review.......................................................................................................................4
Research Plan.............................................................................................................................6
Gantt chart..................................................................................................................................7
Secondary Data sources.............................................................................................................8
References..................................................................................................................................9

2IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
Introduction
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.

3IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
Framework
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.
Overall Performance
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
Overall
performance
Financial
Performance
EPS
ROE
ROA
Debt RatioCustomer
Satisfaction
Resource
management
Human Resource
performance and
Satisfaction
Other Resource
Utilisation
Others Market Position

4IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
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
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
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.
Literature Review
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

5IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
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

6IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
of the literary work is that the relationship between the two is also dependent on the market
of the firm (Vătavu, 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.
Research Plan
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

7IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
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.
Gantt chart
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.
Activities 2018 2019
November December January
Week
1
Week
2
Week
3
Week
4
Week
5
Week
6
Week
7
Week
8
Week
9
Week
10
Topic Development and
Establishing Background
Proposal Development
Scheduling, Budgeting and Risk
assessment
Literature Review
Secondary Data Collection and
Summary
Quantitative Data collection and
Analysis
Summarising Findings
Conclusion
Figure: Gantt Chart
(Source: Created by Author using)
Secondary Data sources
https://www.csr.com.au/investor-relations-and-news/annual-meetings-and-reports
https://www.investsmart.com.au/shares/asx-csr/csr-limited/financials

8IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED

9IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF CSR LIMITED
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