Investigation into Capital Structure and HSBC's Financial Performance

This report analyzes the capital structure of HSBC Holdings, a British multinational investment bank and financial services company. The study investigates the impact of capital structure on the organization's profitability within the financial sector of the United Kingdom. The research includes a literature review, exploring the concept of capital structure, various forms of financial resources, and their relationship with company profitability. The methodology involves both primary and secondary research, including qualitative research with HSBC managers. The report aims to understand the significance of capital structure, identify financial resources, analyze their relationship with profitability, and recommend an appropriate capital structure for enhancing HSBC's financial performance. The structure includes an introduction, literature review, research methodologies, data analysis, results, discussions, conclusions, and recommendations, along with a personal development section. The research highlights the importance of capital structure in maximizing profitability and offers insights for financial sector management.

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).

CHAPTER – 2 LITERATURE REVIEW
Literature review can be termed as publish information related to specific subject areas
that helps in getting necessary information. So, it is just simply summary of sources or review of
scholarly papers, article related to current knowledge and finding pertaining to particular areas of
study. In preparation of dissertation, journal article literature review is made so that information
can be critically reviewed. Moreover, it leads in credibility of work, demonstrates things that
have been learn from others and research is starting point for new ideas. So, literature review
related to impact of capital structure on profitability of organization within financial sector can
be illustrated as follows:
2.1 Theme 1: Concept of capital structure and its importance for organisation
As noted by Mendes (2020), capital structure is combination of both equity and debt that
are used by organization to finance its capital for various operation and growth of business in
external environment. Moreover, it can be stated that loans or bond issues that come under debt
on the other hand retained earning are parts of equity. At the same time the author also illustrate
that short term debt are also part of capital structure. So, concept of capital structure is
arrangement of capital that are raised from different sources so that various fund needs of
business can be meet in the best possible manner.
From the view point of Al-Thuneibat (2018), concept of capital structure is important as
it specific the way total long and short term capital of company will be arranged for achievement
of end goals. Like it contribute in increasing overall value of organization as sound capital
structure lead in enhancing market price of share of company. Furthermore, it helps in effective
utilization of available funds by effective determination of financial requirement, sources from
which it can be raised and utilized. Thus, it can be illustrated that it protect company from both
under and over-capitalization.
Another author Putri and Rahyuda (2020), also supported that capital structure is also
important as it contributed in maximizing return of company. Effectively capital structure helps
in enhancing overall profitability of company in terms of higher return on equity shareholders.
Flexibility is another key importance for enterprise as manager can easily expand or reduce debt
capital as per demand of capital within organization. Furthermore, the author also stated that it
also lead in minimization of financial risk such as with increase in debt in capital structure,
associated financial risk also increases.

There are some points related to importance of capital structure for organization which
are explained by SUMANI and ROZIQ (2020), are it helps enterprise in retaining its market
position. The author illustrates that it saves company from raising much debt capital thereby
leading effectively growth and sustainability of business for longer time frame. Thus, all these
are various benefits of capital structure for organization.
As per the study undertaken by Yapa Abeywardhana (2017), it has been revealed that
there are various important factors that plays an important role while deciding upon the
components of capital structure and proportion of both equity and debt in it. For this various
risks are taken into account such as risk of going insolvent, where the concern firm is not able to
pay off its fixed interest as it become due. This occurs due to the fact that the company has
become insolvent as iit has not earned sufficient profit to service its interest charges. And such
insolvency occurs due to the inclusion of higher proportion of debt into capital structure.
The second factor identified by Kumar, Colombage and Rao (2017), if there are risks of
occurring variations in the return derived by the shareholders due to the higher payment of
interest charges, then this may leads to less use of debt component. But if the returns are
exceeding the interest charges, then they may prefer to include higher debt in the capital
structure.
Another factor which has been considered is the capital costs. When firm borrows funds
from outsiders like banks, debenture-holders and financial institutions, then they are required to
compare the expected cost of such sources of raising finance against their company's
profitability. This is due to fact that if the company dose not generate enough profit to meet its
fixed interest charges, then this may results in liquidation of the company.
Another author Shahar and Manja (2018), who had studied in the same area of factors
affecting the composition of capital structure, where it has been identified that the controlling
aspect also affect the capital structure, as debt capital doesn't lead to dilution of control of the
existing shareholders. Another factor identified them is trading on equity. Trading on equity
refers to the inclusion of fixed interest carrying securities along with equity capital. It is an
attempt of management to increase shareholder's return by including debt capital carrying fixed
interest payment. It is for those companies where there is only equity component in the capital
structure of the company, then the return to shareholder's return can be increased by including
debt component to some extent. This is due to the fact that the interests charges are deductible

expense before assessing profit for income tax purpose. It lowers the profit available for income
tax purpose and accordingly raise shareholder's return. Also, the post tax interest charges gets
low accordingly.
2.2 Theme 2: Various forms of financial resources that are parts of capital structure
According to Shahar and Manja (2018), financial resources are all financial fund that are
raised by company in order to meet its various expense and cost so that needs of customer's can
be fulfilled in the best possible manner. Share, bonds and debentures, promissory notes and
checks are some of the financial resources of capital structure that are used to meeting several
expenses of business. Moreover, as per the author financial resources are liquid assets of
company that are used for continuous operation of business.
As per view of Almansour, Alrawashdeh and Almansour (2019), equity is form of
financial resources in capital structure that represent the value that would be returned to the
shareholder of organization. It can also be offered to shareholder in payment or cash thus equity
represent the book value of company. The author illustrate that in order to calculate shareholder
equity, total assets is minus with total liabilities. It also specifies about debt which is another
financial resources that is used by organization to meet its several expense so that it can attain its
end goals in the best possible manner. Almansour, Alrawashdeh and Almansour (2019), states
that retained earning is the financial resources part of capital structure which refers to the net
income left with business after paying dividends to shareholder of company. The profit earned
by company is reinvested in the firm for its growth and development so that it can attain higher
success. So, the decision of distributing retaining earning of shareholder is with management of
company.
Another author Putri and Rahyuda (2020), further supported that contributed capital is
also part of equity capital as in this money is originally invested in business with exchange of
share or stock of company. It is most costly financial resource of company as it attract investors
to invest money in order to get maximum return. There are various large organization that are
making use of equity capital to meet its financial requirement or promote smooth operation of
business for more time frame.
According to Robiyanto, Putra and Lako (2019), debt is amount of money or capital that
is borrowed by company from one party to another party in order to performed various functions.
Many of the organization make use of debt method to make large purchase of products and

services so that it can attain its end objectives. Cost of debt generally depends on financial
condition of company, there are varieties of debt capital such as long term bonds, short term
commercial papers, vendor financing and float. Like long term bond are most the safest type of
financial resource that are part of capital structure and while amount of interest need to be paid in
meantime. Another financial resources is short term commercial paper in which billions of
dollars can be raised so that day to day working capital requirement can be fulfilled in the best
possible manner. The author further illustrated that Vendor financing is also financial resources
in which organization sells its products and services to customer's before paying the bill to the
vendor. Thus, it contributes in saving overall cost of company with drastically increase in return
on equity. Policyholder floats, it is capital which does not belong to firm while it helps in earning
maximum return on investment.
The author Klasa and et.al., (2018), illustrate that preferences share are share of company
stock with dividends that are given to shareholder before stock dividends are issued. It also does
not include voting rights as compared to common shareholder so it has fixed dividend. There are
various types of preferences share such as participating preferred stock, non-cumulative,
cumulative and convertible preferred stock. So, preferences share is also finance resources of
company that helps in arrangement of capital for smooth operation of business in external
environment.
2.3 Theme 3 Relationship between financial resources and profitability of company
Financial resources are the key for any business operations. No business can survive
without proper acquisition of financial resources. But these resources must be obtained after
assessing all the costs associated in servicing it. The ability of an organization to generate profit
is the most important factor that is being considered before obtaining finance from any source.
There are various sources available to an organization for obtaining finance, but all the sources
differ in terms of profit and thus affect the profitability of the concern. There must be a need to
design an optimum capital structure to minimize the cost associated with it and maximize the
overall profitability.
There always prevails clashes of views when decision related to the proportion of equity
and debt in the capital structure are taken. As per the views of Jouida (2018), equity is cost-
efficient and cheaper source of finance as compared to debt. If studying this aspect of capital
structure in terms of profitability, then it can be said that it is true because debt require

permanent and regular payment of interest. On the other hand, there is flexibility in paying
dividend to shareholders only in the event of making profit. This indicates that there is no
compulsion on the part of business towards servicing its capital in case of equity sources.
Hirdinis (2019) has investigated that debt component should not be completely ignored
while designing capital structure. As it is believed that inclusion of debt component to an
acceptable extent can maximize profits. This is due to the effect of financial leverage. The
concept of financial leverage states that, the return derived from including debt along with the
equity results in higher return on investment for the concern. This effect occurs due to the fact
that in case of equity component only in the capital, then this may leads to higher cost in terms of
dividend declaration. As when there will be no interest charges, then this will results in higher
profits and higher dividend accordingly.
Dao and Ta (2020) in their study, finds that the concepts of financial leverage holds true
only in the event, when the concern is highly profit- making. As per this statement, the author
wants to convey that if the profits are very much high, this means that there is only limited cost
restricted to the rate of interest at which the funds have been obtained. And whatever profits
remain would be distributed among shareholders. But if no debt capital are obtained, then this
may leads to lower returns to shareholders due to the reason that more taxes are to be paid on the
higher profit figures.
Moşteanu, Faccia and Cavaliere (2020), has explained the effect of taxation with
reference to the components of capital structure. As per their research, it has been indicated that
debt cost, that is fixed interest payment is deducted before taxation charges. This prior deduction
of interest from profit results in lower profit available for taxation, and thus less tax will be paid
on such profits, which leads higher returns available for shareholders. Gagarina and et. al.,
(2017), states that the effect of taxation holds true in terms of higher profit available for
shareholders only when the rate at which the interests are paid is lower than the rate of tax. This
means companies can protect them from higher taxes on the amount equivalent to interest
payment. If the rate of tax is lower than the rate of interest than it is always advisable to seek
more of equity capital over debt capital, due to the reason that there will be higher expenses of
interest payment when rate of interest is high which lowers the profit available for shareholders.
Analysis of HSBC holdings Capital resources, structure and profitability
Debt – equity ratio of HSBC holding = Total Debt / Total stockholders’ equity

Year Debt Equity Ratio
2019 Long term debt and
capital lease obligations
275657 183955 1.50
2020 Long term debt and
capital lease obligations
102406 191904 0.53
Here it can be seen that with lower dependence on debt in 2020, there is a reduction in debt –
equity ratio, where the company is now less dependent on external liability for its growth. With
lower interest expenses, company will be able to save its profit that is being paid to service their
debt.
Calculating HSBC holdings Weighted Average Cost of Capital
2019
Particulars Amount Weights (1) Cost of capital
(2)
1*2
Equity 183955 0.40 0.0398 0.01592
Debt 275657 0.60 0.0953 0.05718
Total 459612 1.0 7.31%
2020
Particulars Amount Weights (1) Cost of capital
(2)
1*2
Equity 191904 0.65 0.189 0.06615
Debt 102406 0.35 0.037 0.02405
Total 294310 1.0 9.02 %
Here, the WACC is increasing from 2019 to 2020, due to increase in beta and return on equity
with the corresponding fall in interest expenses which is obviously due to lower debt in the
overall capital. But, it has been already discussed that with lower or no inclusion of debt leads to
lower valuation of the company.

Figure 1: Balance Sheet of HSBC
Interpretation: From the above statement of financial position, it has been identified that with
lower debt and other liabilities as compared to 2019 in 2020; and with higher equity in 2020 as
compared to 2019, HSBC has more profitability which has been clearly indicated through its
rising retained earnings. Further, the shareholder’s equity and the debt proportion in the company
also influences the overall profitability and performance of the business. In the context of HSBC
bank, this can be further understood by the analysis of the above balance sheet where it can be

clearly identified that they have increased the overall shareholder’s equity as well as the
liabilities i.e. Debt in the company but in a proportionate and justified manner. Hence it can be
concluded that the overall financial structure influences the profitability of the company in a
positive manner.
CHAPTER – 3 RESEARCH METHODOLOGIES
This specify about various method that are used by researcher in order to complete the
research or study on topic so that relevant information can be collected and analyzed. Moreover,
it can be stated that there are different method which helps scholar in gathering, analyzing and
interpreting necessary information. So, numerous method that are selected by scholar to continue
the study on impact of capital structure on the profitability of an organisation within financial
sector can be illustrated as follows:
3.1 Research Type
It can be illustrated that research is process of conducting study pertaining to specific topic with
an aim to gathered necessary information and analysis in the best possible manner. There are two
ways in which research can be completed that is qualitative and quantitative by scholar. In
qualitative research, non statistical method are used to understand, analysis and interpretate
information related to impact of capital structure on organization profitability (Flick, 2020). On
contrary, it can be understood that quantitative is more based on numerical or statistical facts and
figure to collect necessary information. Therefore, research out of two types of research method
has make use of qualitative method as it contributed in-depth study related to topic.
3.2 Research approaches
These are procedure and plans which are used by scholar for data collection and analysis
for better outcome of research. These approaches contribute researchers in taking appropriate
decision-making regarding method that could be used to complete the study which can be used
by number of individuals for different purposes. Inductive and deductive are two common
approach in research methodology which are undertaken by research to pursue the research and
collected useful information. Inductive approaches normally start with observation and theories
thus it aims to generate meaning from data collected. So, it involves observation, pattern and

development of theory on the other hand deductive approaches include creation of hypotheses on
basis of existing theory (Politano, Walton and Roberts, 2017). Therefore, in another words,
deductive approaches include reasoning from particular to general. It can be illustrated that
researchers to complete the study related to topic has make use of inductive approach which
involves use of observation in order to delivered necessary and relevant information.
3.3 Research Philosophy
It is the phenomenon or belief that is considered by researchers while collecting,
analyzing information so that research can be made fruitful for number of individual that are
interested in the study. Moreover, it is an vast topic to discussed as it include positivism, realism
and interpretativism belief that is used by researcher while completing the study. Research
philosophy normally deals with nature, development and sources of knowledge so it will reflect
upon various assumption that are used by scholar while doing the research or study on impact of
capital structure on organization profitability. It can be stated that positivism is normally situated
for large samples, highly structured and for quantitative while realism states that it must fit
subject matter (Eisend and Kuss, 2019). On contrary, it can be understood that interpretativism is
suitable for in-depth investigation, small samples or in context of qualitative method. So, it can
be stated that scholar to complete the research on the topic has make use of interpretativism as it
is most suitable for qualitative method.
3.4 Data collection
It specifies about the method that are used by scholar to gathered sufficient information
that are highly related to the topic. Generally there are two common method which are used for
data collection such as primary and secondary. In primary data collection method, researcher
itself gathered information by conducting interview, preparing questionnaire that needs to be
asked to specific group of individual. Or through conducting survey of people through which
information can be collected in relevance of the topic that is the way capital structure impact on
profitability and growth of organization (McManners, 2019). While in secondary sources,
scholar make use of different already published material likes books and journals, articles,
internet and many more. Therefore, the research has make use of both primary and secondary
method of data collection to complete the study on the topic which helps in getting accurate and
more reliable information.

3.5 Validity and reliability
Validity and reliability influence the quality of research project. This research project
entertained all key methods and techniques such as literature review, data analysis and many
such practices that could support the best quality of research outcome. Researcher validated all
the key areas of study that can ensure fulfillment of all objectives of study. Validity is about to
validate the resources, sources of collecting information and many such aspects. Researcher
validated each source of information that can favor to quality in the project (Hayward and
Homer, 2017). On the basis of the objectives formed in the study research has already identified
its sources through which it will collect the information and data. Only the right sources that
validate the best quality are used under this part to achieve the best quality of information and
data. In order to mitigate the final objectives of this study researcher has to rely over every single
area of information. It had to go through to all the respective areas for collecting best quality of
information. This is a key area of study that validate the information used in the study and allow
researcher to rely over the information source. Books and journals are also go through to collect
the best quality of information in project.
3.6 Research Limitation
Resources like finances are limited in number. Project like this require huge resources that can
favor the researcher to collect information and approach all potential area of the study. Financial
resources are among the prominent resources part of the project. Limited financial resources
restricted the researcher to approach every single source of information. Time was also limited
for delivering this project. Being a research in every single study financial resources and time are
all needed to achieve the overall objectives of study. Limitation of time and money restricts the
scholar to meet the objectives in the best way possible. In context to the study there are several
sources that can provide the best level of information and knowledge as a researcher. Limitation
in time and money restricts the authority to approach all such prominent sources that can favor in
form of the best quality of knowledge and information (Yong and Nai'en, 2017). Lack of
experience in conducting the study project is another key limitation part of the study. Experience
favor the overall quality of study in the project. If the researcher holds the huge experience in
doing research project tan it will approach only the right sources that can favor the required
information. It will save the time and money of the researcher in collecting best quality of
information. Limitation in form of experience do not allow the researcher to save quality time

and finances in exploring potential information source. Ongoing COVID pandemic is another
key limitation that is faced under this project. Especially in collecting the information this
limitation affected over the project.
3.7 Data analysis
It is the elements of research methodology that specific the way data will be analyses and
interpretated so that interested people can make use of it as per their needs and preferences.
Moreover, it can be stated that data analysis is a process of cleaning, transformation and
modeling so that useful information can be derived or discovered. Individual can easily take
decision on the basis of data gathered and analysis thus it helps in interpretation. There are two
common method of data analysis used by researchers that can be stated SPSS and thematic. In
thematic analysis, themes, graphs and charts are used for data analysis so that interested people
can easily understand. Therefore, out of both method, thematic analysis has been used by
researcher in order to pursue study on the topic and gathered relevant information.
3.8 Research design
It states overall strategy that is used by researcher in order to integrate different components in
sequential and logical order so that necessary information can be derived. Furthermore, it
contributes in ensuring that research problem is effectively addressed by designing blueprint
regarding the way data will be collected, measured and analyze (Osadchy and et.al., 2018). So,
overall it can be stated that research design explained about various method that are selected by
research to complete the study and gathered relevant information.
3.9 Sampling
It is a statistical method in which predetermined number of observation are taken from
group of individual or large population so that necessary data can be collected and analyses.
Such as in the research around 30 managers of HSBC holding are taken in order to gathered
information related to impact of capital structuring on overall profitability of company. Thereby
questionnaire is prepared in order to know perspective of individual regarding the topic so that
research can be make useful.
3.10 Ethical consideration
While making the research all ethics has been considered so that get outcome can be
gained. Such as researcher has tried to avoid discrimination among several respondent so that
each of them is free to share its perspective in the best possible manner. At the same time

declaration form has been filled, consent from various respondent have been taken while taking
their point of view. Moreover, in the study wherever citation are required are made in order to
ensure that it is gathered from reliable and valid sources.

CHAPTER – 4 DATA ANALYSIS
This is chapter that has included questionnaire that are ask to various respondent so that
useful information can be gained and effective analysis can be done. So, it is scrutinizing
unnecessary information and drawing helpful conclusion that can be helpful in manager of
company to take decision regarding capital structuring. Moreover, data analysis relies on
particular method that are used by researcher in order to extract information related to impact of
capital structuring on firm.
Theme 1: All of the above options has been selected by maximum number of respondent.
What do mean by optimum capital
structure?
Outcome
Best Mix of debt and equity 2
Proportion in which equity and debt of
company are organized
6
Both of the above mentioned options 22
Total 30
7%
20%
73%
Optimum capital structure
Best Mix of debt and equity
Proportion in which equity and
debt of company are organized
Both of the above mentioned
options

Interpretation: From the above pie chart it can be clearly stated that optimum capital structure
means best mix of debt as well as equity that helps company in meeting all its expense and
achievement of end goals. Out of 30 respondent, 73% of respondent has selected both of the
above options for stating the meaning of optimum capital structure. While on the other hand 20%
of people have selected mix of debt and equity and 7% of proportion in which equity and debt
are organized so that optimum capital structure can be formed. So, it can be understand that
optimum capital structuring is effective organize of both equity and debt.
Theme 2: Yes manager of HSBC bank focused on designing appropriate capital structure for
benefits of organization.
Does the manager of HSBC bank
emphasizes on designing appropriate capital
structure for growth and development of
firm?
Outcome
Yes 28
No 2
Total 30
Interpretation: The table clearly represent that manager of HSBC bank give importance to
designing of right capital structure that could contribute in growth and success of organization.
Around 93% of respondent has selected yes options which explained that manager by devoting
more time is able to design appropriate capital structure of company so that it can retain its
93%
7%
Capital structure of HSBC
Yes
No

market share for longer time frame. On contrary, 7 % of respondent have selected no option
which means that as per them manager of HSBC bank does not give importance to design of
proper capital structure so that end goals can be achieved. So, it can be understood that manager
by emphasizing on optimum capital structure is able to grow and expand business of HSBC
across United Kingdom.
Theme 3: Issue of equity, debt and retained earning are main sources of finance through which
HSBC bank raise its capital for achievement of end goals.
What are the different sources of finance
through which company can raise its
capital in order to achieve its end
objectives?
Outcome
Issue of equity 2
Through debt 2
Retained earning 2
All of the above 24
Total 30
7%
7%
7%
80%
Different sources of finance
Issue of equity
Through debt
Retained earning
All of the above

Interpretation: It can be interpreted form the above data analysis that there are various sources
through which manager can raise finance for organization so that several associated expenses can
be meet. 2 respondent has selected issue of equity, through debt and retained earning respective
options for stating various sources of finance. 24 respondent have chosen all of the above options
which helps in interpreting that manager make use of different sources in order to raise finance
for the company. The first and foremost method that is used by company to arrange capital is
issue of equity, then debt and at last it makes use of retained earning. Overall it can be said that
various sources of finance helps in meeting all expense and associated cost of company.
Therefore, it can be stated that HSBC bank by making use of various sources of raising fund is
able to expand its business operations in different parts of the world.
Theme 4: Increase in value and reduction in financial risk are two importance of effective
capital structure of firm.
Why it is important for manager to devote
high time and energy to decide appropriate
capital structure?
Outcome
Increase in value of firm 12
Maximizing of return 2
Effective utilization of available fund 1
Reduction of financial risk 12
Minimization of overall cost of capital. 1
All of the above 2
Total 30

Interpretation: From the research conducted, data gathered it can be understood that there are
various reason for which manager of HSBC bank needs to devotes its high time, efforts and
energy. There are 40% of individual or manager of HSBC bank which clearly state that it is
important for them to design appropriate capital structure because it lead in increase overall
value of company and reduce associated financial risk to more extend. While 3% of respondent
has selected or stated that minimization of overall cost involved in acquiring capital and effective
utilization of available. On the other hand, remaining 7% people have selected all of the above
options and maximizing of return so it can be interpreted that company by maintaining optimum
capital structure can easily enhance its market share. Therefore, it can be summarized that it is
crucial for manager of HSBC banks to take several steps to design optimum capital structure so
that company can increase its brand image in minds and hearts of maximum number of
customer's.
Theme 5: Contribute in growth and success of organization is an option which has been selected
by maximum number of respondent.
What is the impact of effective capital
structure on organization?
Outcome
It helps in enhancing overall profitability of
company.
2
Contribute in growth and expansion of firm. 27
40%
7%
3%
40%
3%7%
Importance of making optimum capital structuring
Increase in value of firm
Maximizing of return
Effective utilization of available
fund
Reduction of financial risk
Minimization of overall cost of
capital.
All of the above

Helps in optimum utilization of capital of
company.
1
Any other options 0
Total 30
Interpretation: There are various impact of effective capital structure on organization which can
be understood such as it helps in increasing profitability, growth of organization, helps in
optimum utilization of resources. 90% of respondent or manager of HSBC banks in United
Kingdom have stated that optimum capital structure of company has helped in enhancing overall
profitability of company. At the same time 7% of them states that it lead in growth and success
of organization to large extend thereby contributing in achievement of end goals in the best
possible manner. There are 3% of respondent that explained that there are many more
importance of capital structuring so company needs to emphasized on capital structure.
Therefore, it can be concluded that the impact of capital structuring is that it leads in increasing
overall profitability and market share of firm in external environment.
7%
90%
3%
impact of effective capital structure on organization
It helps in enhancing
overall profitability of
company.
Contribute in growth and
expansion of firm.
Helps in reducing optimum
utilization of capital of
company.
Any other options

Theme 6: All factors are affecting capital structuring of HSBC bank.
What are several external factors that affect
capital structuring?
Outcome
Attitude of investors 1
Market condition 1
Rate of interest 1
Government rules and regulation 1
Cost of capital 1
All of the above 25
Total 30
Interpretation: There are various external factors that affects capital structuring which needs to
be considered by manager of company while deciding appropriate structure for effective
operations of business. Rules and regulation made by government, rate of interest, cost of capital,
attitude of investors and market condition are numerous external factors that impact on capital
structuring. From the data collected it has been identified that 83% of respondent agrees that all
3%3%
3%3%
3%
83%
Several external factors that affect capital structuring
Attitude of investors
Market condition
Rate of interest
Government rules and
regulation
Cost of capital
All of the above

of the above options has been selected by maximum employees. So, it can be understood that
there are wide range of factors that affect capital structuring of company that manager of HSBC
bank has considered in order to contribute in growth and expansion of business. Moreover, it can
be interpreted that 3% have chosen respective options like market condition, cost of capital,
attitude of investors and many more. Thus, manager of bank while design capital structure needs
to considered all such external factors for benefits of organization.
Theme 7: The manager has decided appropriate proportion of equity and debt in order to make
optimum capital structure for firm.
What are the various method that are used
by manager to decide appropriate capital
structure so that end objectives can be
achieved in the best possible manner?
Outcome
Taking all components of capital 3
Identifying alternative sources which could be
used to raise fund
2
Deciding appropriate proportion of equity and
debt
22
More 3
Total 30

Interpretation: From the above chart it can be illustrated that manager are making use of
different methods in order to decide right capital structure so that it can retained its competitive
positioning for longer time frame. As per view of 73% of respondent, manager of bank decide
equity and debt in appropriate proportion that helps in making optimum capital structuring and
growth of firm. Furthermore, it can be interpreted from above analysis that 10% of respondent
has stated that manager considered all components of capital and many more method while
deciding capital structure. 7% of respondent has stated that manager of bank through identifying
alternative sources of raising fund is able to contribute in designing better capital structure. So,
overall it can be interpreted from above analysis that HSBC bank manager by making use of
various method is able to contributed in designing right capital structure that can yield maximum
benefits to organization.
Theme 8: Nature and size of firm is major determinants of capital structuring.
What are major determinants of capital
structuring?
Outcome
Growth of company 3
Nature and size of firm 23
Flexibility of capital structure 2
10%7%
73%
10%
various method that are used by manager to decide appropriate
capital structure
Taking all components of
capital
Identifying alternative sources
which could be used to raise
fund
Deciding appropriate proportion
of equity and debt
More

Requirement of investors. 1
Timing of issue 1
Total 30
Interpretation: There are numerous factors that determined capital structure of company like
nature and size, requirement of investors, growth of company, timing of issue and flexibility of
capital structure. 77% of individuals has stated that nature and size of company is major
determinants of capital structuring of HSBC bank. While remaining 3% of respondent explained
that requirement of investors and timing of issue are two major determinants of capital
structuring. On contrary, it can be interpreted that 10% of people emphasized that growth of
company is also major determinants of capital structure which needs to be considered by
manager while taking right decision. Only 7% of individual specific that flexibility of capital
structure is also determinants that is considered by manager of HSBC for gaining maximum
outcome. Thus, it can be understood that nature and size of firm is major determinants of capital
structure for organization.
Theme 9: Most of the people has selected agreed options that company has effective capital
structure which contribute in expansion of business.
10%
77%
7%
3%3%
Major determinants of capital structuring
Growth of company
Nature and size of firm
Flexibility of capital structure
Requirement of investors.
Timing of issue

Do you agree that company has effective
capital structure which contribute in
expansion of business?
Outcome
Strongly agreed 3
Agree 27
Neutral 0
Disagreed 0
Strongly disagree 0
Total 30
Interpretation: It can be explained from the above pie char, that HSBC manager has effective
make capital structure of company so that it can easily and smoothly operate its several functions
in external environment. 27 individual or manager of company have agreed that it has better
capital structure which contributed in making optimum utilization of resources and generating
more profitability. While remaining 3 respondent has opted that HSBC bank does not have
proper capital structure which create barrier in effective operations of business. Moreover, it can
be interpreted that nobody has selected disagreed, strongly disagreed and neutral options. Thus,
10%
90%
Effective capital structure of HSBC
Strongly agreed
Agree
Neutral
Disagreed
Strongly disagree

it can be analyses from above data collected that effectively capital structured has yield
maximum outcome for organisation.
Theme 10: Changes in external environment is the biggest challenges that is faced by manager
of HSBC bank while deciding capital structure of company.
What are challenges faced by manager
while deciding capital structure of
company?
Outcome
Changes in external environment 20
Limited availability of financial resources 5
Incapability of manager to decide proper
capital structure
2
None of the above options. 3
Total 30
67%
17%
7%10%
Challenges faced by manager while deciding capital structure of
company
Changes in external
environment
Limited availability of financial
resources
Incapability of manager to
decide proper capital structure
None of the above options.

Interpretation: There are numerous challenges which are bear by manager of HSBC bank while
taking right decision related to capital structuring of company so that it can attain its end
objectives in the best possible manner. Changes in external environment is one of the most
option selected by most of the respondent of the survey that is around 67% of manager of HSBC
has said that due to different changes they are unable to decide optimum capital structure that
could be fruitful for organization in longer time frame. There are 17% respondent which has
stated that limited availability of finance resources is also key challenges that they face while
designing capital structure of company. On the other hand, 7% clarify that incapability of
manager to decide proper capital structure is also challenges related to the same which needs to
be removed for better outcome. At last, it can be interpreted from above analysis that 10% of
people have selected none of the above options which states that manager does not face any
challenges while taking decision related to capital structuring. So, it can be said that all these
challenges needs to be removed by manager so that company can retained its market share and
grow in international market for more time frame.

CHAPTER- 5 RESULTS AND DISCUSSION
It is chapter that include key information related to results or outcome that has been find
out by pursuing study related to the topic so that necessary decision can be taken by interested
parties. It is an interpretation of finding that has been analyses after making use of both primary
and secondary method to collect data in order to derive necessary information. This chapter has
summarized all crucial points that has been understood while conducting research for fruitful of
study. Therefore, the results that has been identified from above analysis can be interpreted as
follows:
There are various things which can be easily interpreted from above analysis is that
Optimum capital structure refers to best mix of both debt and equity that are used by company to
meet its financial requirement. Manager of HSBC banks has devoted its high time, efforts and
skills in order to design appropriate capital structure so that company can easily grow and
expand its operations across worldwide. It by putting its best efforts has make effectively capital
structure so that financial resources related to operations of company can be arranged and end
objectives can be achieved in the best possible manner. From the above study it can also be
interpreted that there are different sources from which finance can be arranged so that expense of
company can be meet. HSBC bank use of all the sources of finance to raise its capital such as
issue of equity, debt and retained earning for achievement of end objectives of company.
Moreover, from the above study, there are various things that can be analyses and
interpreted such as manager of company give importance to design appropriate capital structure
so that it can retain its market share for more time frame. The reason which states importance of
capital structure are increase in value of firm, reduction of financial risk, effectively utilization of
fund and minimization of overall cost of company. So, manager of HSBC bank in order to
provide various benefits to company has put its best efforts to design optimum capital structure
which has contributed in growth and success of firm. Therefore, it can be stated that it is crucial
for company to make effective mix of equity and debt so that financial resources can be
effectively arranged and used in smooth operations of business.
It can also be discussed from study that there are numerous impact of capital structuring
which are fruitful for business operation. Such as from the data collected it is identified that
capital structuring has contributed in growth and expansion of firm in international market as it is
able to meet all its expenses. While, there are some people that states that it leads in enhancing

overall profitability of company by making optimum use of available capital. At the same time, it
can be interpreted and discussed that there are several external factors that affects capital
structuring. Likewise, market condition, rules and regulation made by government and cost of
capital that needs to be considered by manager while deciding HSBC banks. So, the manager of
bank has considered all these factors while taking decision related to capital structuring so that
company can retained its market share and profitability in longer term (Potter and Heckman,
2018). Thus, all these have helped manager in making optimum capital structure so that various
financial needs of business can be meet in the best possible manner.
There are more things which can also be discussed from study is that there are different
method which are used by manager to design right capital structure so that company can enjoy
maximum profitability. For examples: HSBC banks has decided appropriate proportion of both
equity and debt for benefits of organization. There are also others method which could be used
by manager like taking all components of capital, identifying alternative sources from which
fund can be raised for smooth operations of business (). So, effectively use of several methods
and steps by manager has contributed in achievement of HSBC objectives.
There are major determinants of capital structuring such as nature, size of operations of
business, flexibility of capital structure, requirement of investors, timing of issue and many
more. HSBC bank on the basis of all these determinants has design capital structure or mix of
equity and debt. So, it can be stated that manager of HSBC banks has determined requirement of
capital majorly on basis of nature and size of firm. Thus, it can be discussed that all these
determinants has contributed in better capital structuring and growth of organization in external
environment.
Furthermore, it can be discussed that there are various changes in external environment
that are faced by manager of companies while deciding appropriate capital structure. Like
changes in taste and preferences of people, development of technology or new rules and
regulation made by government. So it can be stated that manager has take crucial steps to remove
challenges so that company can maintained its market share for more time frame
(Narayanaswamy, Blitzer and Carvajal, 2017). Moreover, it has been identified and find out that
HSBC manager is also facing challenges related to limited availability of financial resources and
at the same time some of the people states that incapable of manager to decide effective capital
structures.

CHAPTER -6 CONCLUSION AND RECOMMENDATION
6.1 Summary
From the above research conducted for studying the relationship between the optimum mix of
equity and debt and its corresponding impact on the profitability of the company, the researcher
gain idea about various techniques and methods that can be incorporated by financial manager of
the company in their decision making activity, which can lead them towards adopting that mix or
say optimum mix that will be helpful in generating their overall profitability. The technique of
calculating leverage such as financial leverage allows for opting both debt and equity of the firm,
where no debt component in the capital structure leads to lower valuation of the company while
more debt over lower profitability is not advisable as it leads to financial risk for the concern and
also the company’s valuation decreases if more debt components are included into the capital
structure of the company. Also the returns to shareholders get reduced with the inclusion of debt
components as some part or it can be said that there is fixed interest payments which accordingly
reduces the profit available and distributable among the equity shareholders. Even if the
company has higher profitability, then also debt instruments are to be added in the capital
structure with great care by the financial body responsible for taking financing decision; it is due
to the fact that more debt always results in more interests along with creating obligations for the
concern to pay the same after or within the duration specified in the agreement.
6.2 Evaluation of Results
The present research includes conduction of both primary and secondary research for collecting
various information, gaining idea and developing knowledge pertaining to various financial
resources available for the organisation for obtaining and financing their business operations,
expansions and acquisitions of fixed assets and other organisations. The results obtained from
this research is of great relevance for the financial management body of the company and other
scholars in the same area of study. The researcher also gets deeper insight into the availability of
various financial instruments under the two broad category of equity and debt. The management
must consider all these available sources for availing finance for the company as each instrument
has different advantages and disadvantages which makes them suitable and even unsuitable to
acquire. Many companies believed in financing their operations through retaining sufficient
earnings out of the profit made by them every year is considered as a part of equity capital of the

concern. Also such form of financing helps in avoiding extra costs of capital to be incurred.
From this research it has been learnt that retained earnings are the third source of finance that has
been resorted to after equity and debt components and related instruments.
The results of this research has been affected from the limitation of sample size, as due to
time and resource constraints, the researcher has been able to conduct their research work just by
randomly choosing its 30 participants from the financial management team of HSBC holdings.
But the selection of sample has been done through random sampling technique which is actually
considered to be suitable while the sample size involved is small. And this random selection of
participants helps in obtaining all the required features of the participants where equal chance has
been given to all. In this way researcher has tried to incorporate all the information related to the
research problem. For conducting research work successfully researcher has adopted
questionnaire tool for obtaining primary information from respondents. This particular limitation
pertaining to sample size can be improved through dedicating higher resources and including
more research tools such as interviews, observations and conducting surveys on financial
managers of multiple organisation to get a deep insight over the issue of the research.
Taking about the limitations and improvements related to research problem and the problem
faced by many financial decision making body, such as effect of external factors and incapability
of managers in deciding upon the optimum capital structure, this can be improved through
studying those factors that are causing obstruction in the manager’s conduct and by looking at
competitor’s financial strategy and its effect on their profitability both in the negative and
positive sense.
6.3 Recommendations based on Evaluation
There are several recommendations that has been identified after studying various information
and suggestions related to the research problem, such as:
 The companies should first calculate the incremental costs that can be caused due the
capital raising through both available equity and debt instruments (Antill and Grenadier,
2019).
 The companies are advised to look at the effect on the valuation of firm through
determining their leverage and risk associated with it.
 The other factor that is recommended to be considered is the shareholders return and the
after effect on their returns due to successive capital raising.

 The research has been conducted on HSBC holding’s capital structure and its relationship
with their profitability, where its managers should determine that mixture of debt and
equity capital in their capital structure which results in lowest possible cost of capital and
highest possible valuation of their organisation in the market.
 In order to cope up with the limited availability of resources related to procuring finance,
it can be recommended that companies and finance managers can procure funds through
selling those assets that not being used by the company in their operations (Adeoye,
Islam and Adekunle, 2020). Also, on such assets they are incurring expenses just for their
maintenance, then these assets can be sold for obtaining finance in the events of not able
to hire external source of finance.
6.4 Future Work
The present research has been done to analyse the relationship between financial resources
forming part of capital structure and profitability, this work may be developed and improved
through involving costing aspects and risks associated with all those financial resources that are
popularly obtained by most of the companies in the financial sector and more specifically HSBC
Holdings. And these two factors have been identified through this research that may be included
in further research in the similar area as all financial resources has different risk and cost element
associated with it.
CHAPTER -7 PERSONAL DEVELOPMENT
It is also one of the chapter of dissertation that include information related to personal
development that I gained while conducting study on the topic. Personal development is lifelong
process that need to be performed by each and every individual to work on its existing skills and
capabilities. So, this chapter will highlight points related to assessment of skills, qualities that are
present in me and the way it can be developed further so that I can get higher success in my both
personal and professional life.
From the above research or study, I have understood about several skills that are present
in me and needs to be developed furthers so that I can get higher success in future circumstance.
For examples, while making the research on impact of capital structure on profitability of
organization within financial sector I get to know that I have good research skills which helps me
in gathering necessary information in limited time frame. So, that study can be made more useful

for interested parties or companies can take right related to structuring of their capital. Moreover,
as per my perspective, I am able to understand that research has further helped in enhancing my
analytical skills (Serrat, 2018). As through this I am able to analysis and interpreted information
which is gathered from both primary and secondary thereby extract useful data or facts related to
the study. From the point of view of myself I already have time management skills which helps
me in managing several tasks or activities on time so that useful and important information can
be gathered and analysis for better study. Through these skills, I am able to make the best use of
limited time and contribute in gathering more and more accurate, reliable and useful information
related to the content or matter of study.
On contrary there are several skills that I have developed after completing this
dissertation such as written communication, presentation of information in more better manner
and able to prioritizing activities that need to be completed first and last for better outcome. It
can also be stated that the research has helped in improving my written communication skills as I
am able to learn method in which study needs to be presented so that interested people can easily
understand. So, overall it can be understood from above study that it is helpful in grasping all
relevant information and working on my existing skills and capabilities (Little and Balsari‐
Palsule, 2020).
I also understand that the research helps me in developing skills related to the way data
can be collected from different sources so that study can be made effective. At the same time it
can be illustrated that it has helped in enhancing my knowledge related to the way capital
structure can be arranged and company can enjoy maximum market share in international
market. I also get to know that the way I can work with diverse range of individual to pursue the
study and grasp information related to study.
Therefore, it can be summarized that this chapter of personal development was overall
about the skills that are present in me and needs to be developed further so that I can get higher
success in my profession. Thus, this chapter has helps me in understanding key areas that I need
to improve or work on so that I can make more good research or study in future scenario. So,
overall this was chapter related to personal development and skills that I need to work on for
greater success.

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APPENDIX
Topic: To investigate the impact of capital structure on the profitability of an organisation within
financial sector: A case of HSBC holdings.
Background of the study
Capital structure refers to the mixture of various financial resources in the capital of the
company in order to finance business activities. So, whatever the finance is obtained it must
incur some cost to the company which impact directly or indirectly the profitability of the
company. Here HSBC holdings will be taken to study impact of capital structure on its
profitability.
Aims 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.
Rationale
The purpose of conducting this study is to analyse various financial resources which makes
up the capital structure of the company and affects directly and indirectly the company's
profitability. The study also aims at studying HSBC holding's capital structure and suggesting
better and efficient mixture of various financial resources in order to minimize the overall cost of
capital and maximise its profitability.
Research methodology
Research type Qualitative research
Research approach For addressing research issue, the study will
adopt the inductive approach.
Research philosophy For analysing qualitative information

pertaining to the study, interpretivitism
philosophy will be used.
Data collection Qualitative data will be collected from both
primary and secondary sources.
Sampling A sample of 30 management accountant will be
randomly selected to collect information for
the research.
Data analysis Thematic perception test will be applied to
analyse qualitive data.
Research limitation Time, resources and size of sample.
Ethical consideration No inhuman behaviour will be adapted while
collecting information and consent form will
be filled with participants before filling
questionnaire from them.
Literature review
According to Harris and Roark (2019), capital structure means the proportion of debt and
equity in the capital of a company. The capital structure is important as it is meant for financing
business activities and acquiring assets for the business. The capital structure of a concern is
stated in the form of debt-equity ratio. As per the views of Martellini, Milhau and Tarelli (2018),
capital structure must be optimally designed, which means there must be appropriate mix of debt
and equity in the capital of the company. The optimal capital structure refers to such mix of debt
and equity component which minimizes overall cost of capital and increases profitability.
Jouida (2018), states that, a minor deficiency in making decision related to the capital
structure of a many, may results in the financial crisis for the company. This is due to the fact
that debt financing requires regular services in terms of interest payments and if the company
fails to earn enough profits to service its debt, then it may leads to complex situation in the
company.
Timeline

Activities / Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Research topic
selection
Developing
research proposal
Designing the
research aims and
objectives
Literature review
Defining research
methodology
Drafting
questionnaire
Sample selection
Collection of data
Analysing the data
Concluding the
findings
Recommendations
Report preparation
Submission to the
tutor
Updating the
feedback
Final submission

1

Appendix
Questionnaire
What do mean by optimum capital structure?
 Best Mix of debt and equity
 Proportion in which equity and debt of company are organized.
 Both of the above mentioned options.
Does the manager of HSBC bank emphasizes on designing appropriate capital structure for
growth and development of firm?
 Yes
 No
What are the different sources of finance through which company can raise its capital in order
to achieve its end objectives?
 Issue of equity
 Through debt
 Retained earning
 Any other options.
Why it is important for manager to devote high time and energy to decide appropriate capital
structure?
 Increase in value of firm
 Maximizing of return
 Effective utilization of available fund
 Reduction of financial risk
 Minimization of overall cost of capital.
 All of the above
What is the impact of effective capital structure on organization?
 It helps in enhancing overall profitability of company.
 Contribute in growth and expansion of firm.
 Helps in reducing optimum utilization of capital of company.
 Any other options
What are several external factors that affect capital structuring?
2

 Attitude of investors
 Market condition
 Rate of interest
 Government rules and regulation
 Cost of capital
 None of the above
What are the various method that are used by manager to decide appropriate capital structure so
that end objectives can be achieved in the best possible manner?
 Taking all components of capital
 Identifying alternative sources which could be used to raise fund
 Deciding appropriate proportion of equity and debt
 More
What are major determinants of capital structuring?
 Growth of company
 Nature and size of firm.
 Flexibility of capital structure
 Requirement of investors.
 Timing of issue
Do you agree that company has effective capital structure which contribute in expansion of
business?
 Strongly agreed
 Agree
 Neutral
 Disagreed
 Strongly disagree
What are challenges faced by manager while deciding capital structure of company?
 Changes in external environment
 Limited availability of financial resources
 Incapability of manager to decide proper capital structure
 None of the above options.
Provide some suggestion related to effectively capital structure that can helps in enhancing
3

overall financial performance of company?
4