Financlng manufacturing companies: a study of the capital structure of traded manufacturing companies in kenya.
Bwire, Henry J
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The purpose of, this study was to ascerta in the financing patterns of traded manuf ac t.ur.drrg companies in Kenya. Also looked at '(~as t.he -~ffect of certain factors on' debt and debt/equity ratios. A number of test variables w~re correlated against debt and debt/equity ratios, earnings, stability of earnings, fixed assets, capital intensity and competition. Twenty manufacturing companies traded on the NaLrob i. StocK Exchange were selected. Financial statement data, covering ,tive years between llJ74 and lY7~; were co lLe c te d tor each company. These data were analysed ~ various ways including correlations, ratio analysis and graphical presentations to test the hypotheses of the study. r'ive hypotheses were tasted. The first states that there is no relationship between the earnings of a company and the amount of debt it carries. SecoridLy , it is hypot.hes ize d that there is no relationship between the stability o£ earnings 2:J.d the debt/equity ratio of a company. The third hypothesis states that there is no relationship between the book value of fixed assets and the amount of debt a company carries. Fourthly, it was hypothesized that there is no relationship between the capital intensity of a company and its debt/equity ratio. The fifth hypothesis states that the greater the de gr ee of competition in an industry, the lower the debt/equity r a t Los of companies within that industry.