Title: Capital structure and financial performance of manufacturing firms in Kampala district : Examining how the firm's financing mix influences financial performance.
Authors: Authors: Timbirimu Micheal ,Asiimwe Violet Kiguli,Edward Lukwago,Turigye Joab
Volume: 10
Issue: 2
Pages: 66-72
Publication Date: 2026/02/28
Abstract:
The research study was titled "Capital Structure and Financial Performance of Manufacturing Firms in Kampala District" and aimed at investigating the impact of the capital structure mix on the financial performance of firms. The major objective of the research study was to investigate the impact of capital structure mix variables, namely debt capital, equity capital, and retained earnings, on the financial performance of manufacturing firms in Kampala District, Uganda. The research study was conducted using a quantitative cross-sectional study design, which allowed the researcher to collect data at a single point in time to determine the relationship between capital structure and financial performance. The target population for the research study consisted of senior management, finance officers, and accountants from registered manufacturing firms in Kampala District. A total of 110 respondents were selected from 25 registered manufacturing firms in Kampala District to participate in the research study. The research study utilized a purposive sampling method to select firms and respondents who had appropriate knowledge and experience in financial management and capital structure mix decisions. Data for the research study was collected using structured questionnaires to gather primary data and document review guides to extract secondary data from financial statements and records. The study established that all components of the capital structure, including debt capital, equity capital, and retained earnings, had a positive and significant effect on the financial performance of manufacturing firms. Of the three components of the capital structure, retained earnings were the most dominant in enhancing the financial performance of the firms by ensuring liquidity and financial stability, while equity capital played an important role in enhancing profitability and sustainability of the firms. Debt capital, on the other hand, played a moderate but significant role in enhancing the financial performance of the firms, thereby confirming the importance of borrowing in the growth of firms. The study established that the capital structure of the firms played a crucial role in enhancing the financial performance of the firms in the manufacturing industry in the Kampala District. The study further established that retained earnings played the most crucial role in ensuring the financial stability and growth of the firms in the manufacturing industry in the Kampala District. The study recommended that the firms in the manufacturing industry in the Kampala District should consider the use of retained earnings and equity financing before considering debt financing in order to reduce the risks.