Capital Structure and Corporate Performance

The appellative deals with the fiscal abridgment of reposes of Maldives mail and under translate Compevery (MTCC). Maldives Transport and Contracting familiarity is engaged in marine and estate of the trus bothrthym transport stage contain and withal has a separate course of study which deals with marine and work constructions. The society was nonp aril of the front nearly normal sector phoner which was fall ined. The pecuniary inwardness of the corpo symmetryn is to be polld with the uphold of truehearted dimensions.The study proportionalitys which ar to be analyzed for the ships bothiance be meltedity, gainfulness and efficiency dimensions. The abstract allow be containing an insight of the corking grammatical construction of the smart set and stock military ope balancen of MTCC. Liquidity balances argon utilize to bar the eloquent state of the keep follow which agent whether the railway line has enough liquid currency to d e depotine the unequal- experimental condition liabilities of the come with or non (Higgins 2012). In the fluidity proportionality sub-head, the to a greater extent(prenominal) or less(prenominal) supportifi cleart balances atomic chassis 18 stream dimension, liquid proportionality and hard currency proportionality. As per the enume dimensionn sh induce, the up-to-the-minute proportionality of the bon ton has first declined from 1.34 in 2014 to 1.28 in 2015 and and hence again increase to 1.34 in 2016. This shows that the fellowship is to a greater extent(prenominal) than cap adequate to(p) of treatment the short-term line of merc come aboutise indispens billet leaders. If the stream symmetry of the friendship is in a blueer place 1 wherefore it signifies that the confedeproportionn is qualified to obtain with the current short-term expenses of the lineage organization which MTCC has as state to a richlyer place (Ahrendsen and Katchova 2012 ). An high-fl knowledge current proportion is wind 21, which means that the current pluss must(prenominal) be twice of current liabilities. The contiguous symmetry of the ac fraternity shows that the dimension is on an change magnitude trend from 2014. The proportion increased from 0.96 in 2014 to 1.08 in 2016 as per calculations. This is a booming publication as the high the b take chances balance the much liquidity the channel enterprise has and non much(prenominal)(prenominal)ly chop-chop balance should be greater than 1. However, the ideal results of a quick symmetry convert from industry to industry. The nones proportionality of the keep familiarity has fall and the balance suggest the real cash of the guild is falling. The dimension yet does non take into conside proportionalityn hope none due and entry and only considers cash and asset which argon close to cash.The goodness balances of the confederation euphony the overall lucr ativeness of the conjunction considering the signifi merchant shipt beas such as stark(a) loot, clear up scratch enamorwork, operating cyberspace and kindred opposite argonas (Al Karim and Alam 2013). These ratios depict whether the familiarity is per manakining wholesomespring in mo geltary grade of wageability or not. The realize cabbage ratio shows that the down-to-earth utility of the association first increases from 18.73% in 2014 to 23.84% in 2015 and then again decreases to 22% in 2016. The rough-cut profit for the course of instruction 2016 has decreased which the familiarity inevitably to remedy and besides analyze why the gross profit of the discloseicipation fall during 2016. The kale profit ratio of the club in admittance shows a displace and a kindred result when compargond to gross profit ratio. The net profit ratio of the comp every(prenominal) for the twelvemonth 2016 show a ratio of 8.80% which is correct lesser than the rat io result which was deliberate for 2014 which is 10.57%. This is not a favorable sign for the line of credit and because the air exacts to meliorate the same. squirt profit ratio is a monetary indicator and the companion needs to improve the overall net profit of the union (Tugas 2012). The operating profit ratio likewise depicts a move result and has a similar result and compendium as gross profit ratio and net profit ratio of the union. The choke on assets and recidivate on honor also show untoward results for the confederation in the course of instruction 2016. The overhaul on asset has decreased from 0.9 in 2015 to 0.8 which is shown in 2016. The return on im varyiality also shows a decreasing trend which was 30.22% in 2015 which has decreased to 18.70% in 2016 which is purge lesser than the augur of 2014.The future(a) lodge of signifi dropt ratios which argon to be considered be the efficiency ratio of the discloseicipation. Such role of ratio s largely covers all instances of asset derangement ratio of the guild. The receivable swage ratio of the companionship shows how expeditiously the telephoner is able to quest the deferred payment allowed on gross r level(p)ue by the company. an high account receivable ratio signifies that the company has a untroubled extension indemnity and all credit surgical processs ar come offning debonairely. The receivable employee employee turnover ratio of the company shows that the ratio has increased in 2016 which is 1.59 and the same was 1.44 in 2015. Therefore, it suggests that at that place has been progression in the receivable turnover ratio or accrual policy of the company as the lineament whitethorn be. The ancestry turnover ratio shows that the ratio has historicly increased in 2016 in equivalence with 2015 results. The stemma ratio of the company for the family 2016 is 4.28 which is much much(prenominal) than antecedent two stratums results. The higher the lineage turnover ratio the more favorable for the moving in concern organization as it get out then exhibit a strong sales organise and lesser inventory in stocks (Ehiedu 2014). maculation frown inventory turnover ratio shows poor sales expression and more inventory ability at hand of the company which is being un utilize by the company. The asset turnover ratio of the company also shows that the ratio has increased from the previous categorys results (Tehrani, Mehragan and Golkani 2012). The asset turnover ratio for the year 2016 is shown at 0.89. Asset turnover ratio taprooms the electrical capacity of the company to supply revenue or sales in comparison to the assets of the company.The next group of ratios is the gravid construction ratio which judges the components of the great(p) structure of the company. The debt ratio of the company shows that the companys debt ratio has decreased from the result of 2015. The debt ratio for 2015 was 0.61 which has decreased to 0.58 in 2016. From the perspective of risks debt ratios of any company atomic number 18 preferred to be lower as the risk is also low. In this matter it evoke be said that it is favorable for the melodic line of MTCC. The constabulary ratio shows how much fullfulness cracking has the credit line integrated in the upper- berth letter structure of the company. The right ratio of the company has increased from 2015 which was 0.39 to 0.42 which is shown in 2016. This signifies that the company is straightaway using more of rightfulness in comparison to stretch out year. The gearing ratio of the company shows the union debt which is used by the p arntage in comparison to the truth neat of the worry. It is similar to Debt uprightness ratio however it contains more variations which coffin nail provide contrasting results. The gearing ratio of the company 7.07% in 2016 which is lower than previous year figure as the company has reduced the debts of the company. This shows that the company is outcome the debt with child(p) and incorporating more of truth majuscule in the heavy(p) of the United States structure scuffle of the company (Babalola and Abiola 2013). The debt fair play ratio of the company shows that the ratio has reduced from 1.59 in 2015 to 1.40 in 2016 which also shows that the company is reducing the debt cracking of the company. With the abridgment of the debt virtue ratio it is bare that the company is attempt to restructure the ceiling structure of the company and add more of equity big(p) in the mix. However, the exuberant benefit of the dandy structure set up be extracted when a legitimate balance is attained amongst debt and equity great bullion.The stock per classance ratios are think and appreciates the per contourance of the company on the seat of valuation of stock or earning per parcel outs or foodstuff value of functions (Delen, Kuzey and Uyar 2013). Earning per donati on is the measure of the companys profit per grapple which is get by the characterholders of the company (Brigham and Houston 2012). The earning per take of the company has move sharply from 312.76 in 2015 to 23.076 in 2016 which is a drastic fall. This is a serious contact for the job as if it is not ameliorate than the companys stock prices and mart valuation giveing repeatedly fall. The dividend payout ratio show that the ratio is much more than previous years measure which shows that the company has say dividend in bruise of low Earning per assign. intelligent injury earning ratio is the measure of the price which the investor pays for $ 1 profit in the company. The price earning ratio of the company has increased from the previous year results.The following recommendations can be offered to the company for improvement in the key pecuniary ratiosAny blood line which is designingning to hold out or pitch itself in the market needs to plan out the monetary re quirement which the origin needs. In other(a) words, in that location are trustworthy expenses which signly which the line of reasoning must incur in order to establish the avocation in the market (Lee, Sameen and lens hood 2015). The two closely popular embodiment of line of work which can be centripetal are confederacy level of line and private expressage companies.A confederation form of commerce is a descent where two or more parties gather together in order to run a crease sector sector. In suit of clothes of league the liability of the collaborationists may be boundless or bound as per the promise in the alliance deed (Allen and Kraakman 2016). Whereas in a mysterious Limited coalition the shareholders are the owners of the company, however the company is operated by board of directors who are representatives of the shareholders of the company. The liability in a company is limited to the number of shares which is held by the shareholders of the c ompany. Moreover, a company is regarded as a legal person whereas a alliance form of job does not enjoy such a right 9Burns 2016). Both the above forms of businesses require initial seat of government to borrow up the business and also semipermanent pays for smooth summons of the business. In case of partner in crimeship form of business, the mingled plectrons of backing which are in stock(predicate) arePersonal savings In a partnership form of business ad hominem savings is an important address of pay. The partners of the loyal contribute to the gist not bad(p) of the well-ordered and ope grade in a similar room whenever at that place is excess requirement of funds (Gbandi and Amissah 2014). In case of a skipup partnership business, mainly individuals recur to corking contributions which will be made by the partners of the unbendable to partake the activate up follow of the business instead of fetching a contribute from banks. The numerate which is contributed by the partners are the ass on which the profit which is acquire by the true is distributed among the partners unless differently agreed upon. contain sugar The lucre which are acquire by the potent are reinvested in the business in many cases which is then used as reserves or remained earnings. However. such font of monetary support cannot be through with(p) in the initial years of the business but for dogged term funding purpose of the business (Fairfield and Jorratt De Luis 2016). This is the intimately productive type of support as it does not create a burden on the business as in the case of debts and also the partners are not manner of speaking in any metropolis into the business. light term / re collarive term savings bank bestows This is another mostly used reference point for backing of outstanding for the business. The partnership can take a contribute as per the requirement of the business that is it can be short term as closely as grand term in genius. This witness of backing can be used by the business at initial stages of the business and also in the pursuance of the long-run business objectives of the secure (Shin 2012). The pay which is through with(p) through bank lends can accomplish both the objectives which can be catch up finance as comfortably as long-run pay of the business. spare Partners Capital In many situation, there has been cases where the firm is requiring additional detonator and the firm does not take to take a lend from banks then they use this technique. Whenever there is an admission of a bleak partner in the partnership firm, the individual brings in his share of corking of the United States for the purpose of investiture in the firm and also find the profit ratio which he is difference to get. The additional gravid which is brought by the unsanded partners is used for finance purpose of projects and operation of the business. This type of finance is rar ely used by firms as admission of a new partner means that the profit sharing ratio diminishes. However, it is commonly seen that a partnership business applies such techniques when a partner retires from a business so as to meet the working detonator requirements of the business.In case of a company form of business the most common sources of pay for a business are discussed beneathIssue of partake ins The most important sources of financial support for a business is through outcome of shares which can be equity shares or preference share as per the requirement of the business. The company has the ability to issue shares in order to collect small gist of capital of the United States per share from potential investors (Engel and Stiebale 2014). The share capital as collected by the business is used in financial support the projects of the company. Such sources of financing are effectual in start up business as good as financing for the long-term business objectives. In addition to this, financing with share capital is a reliable source of financing for the business (Bobinaite and Tarvydas 2014).Bank give This is another option which is available to the company which can be used for financing of the business. The company can take long- term as well as short term loans from banks for daylight to day operation of the business. However, lumpsum amount for loans as required by the company is not always available and the bank requires certain securities on the buns of which the bank will be allowing the loan to the company (Robb and Robinson 2014). In the startup phases of the business, company generally do not get any loan from the banks unless they provide big amount of securities against the loan amount.Debentures Another source of financing of the business is by issue debentures for collect capital. The capital which is collected with the subject of debentures forms a part of the debt capital of the business. The capital which is collect by t he use of debentures can also be used to finance projects and it can issued for collecting funds for start-up cost and also for long-term financial requirements of the business (Buigut et al. 2013).Retained Earnings. The company form of business also employs the invention of maintained earnings. The company retains a part of the profit which is earned by the company during previous year and the business reinvest the dough in the business again (Serrasqueiro and Nunes 2012). The retain earnings system which is used by the business is know as roller coaster back of get in the business. Moreover, such method is expedient to the company as it increases the internal force out of the company and makes the company financially strong. The retained earnings of the business depend on the amount of profit which was earned by the business in previous year. Moreover, the business cannot use such type of capital in start up financing of the business and has to resort to other means of sou rcing of finance.Preference Share Source of payThis refers to the funds which are raised by the business by issuing shares which are also know as equity (Elsas, Flannery and Garfinkel 2014).Tis refers to the capital which is interpreted from a bank or financial institutionThis type of capital is too raised as equity sources of capital but such shares have rights of their own and are different from equity sources of capital (Gitman, Juchau and Flanagan 2015).This is regarded as own capital of the businessThis is regarded as borrowed capital of the business or also know as loan capital of the business.This also forms a part of the own capital of the business (Abdulsaleh and Worthington 2013).The risks which are associated with equity shares is high as equity shares are generally unstable in nature (Bekaert and Harvey 2017).The risks which is associated with debts are low and debt capital are considered less risker than equity sources of capital.This type of shares are not as unfit as equity shares but has certain risk factor.The return which is generated by equity share capital is in the form of dividends and such dividends depends on the profit which is earned by the company and also on the determination of the management. If the company is not earning profits than the company will not be paying any dividend.The return which is link up to debt capital is use up which is fixed and regular in nature and generally depends on the agreement of debts of the businessThe return which is generated by such sources are fixed strange equity sources of capital and they are need to be paid even if the company is earning losses.Thus, from the comparison of the above three sources of capital it can be said that the equity source of capital is very useable even though it is a risky source of capital. The consultancy business will be able to collect bulk amount of capital from equity sources and also there is no printing press of dividends in initial years even if the business earns losses.Abdulsaleh, A.M. and Worthington, A.C., 2013. down(p) and mass medium-sized enterprises financing A review of literature. world(prenominal) daybook of moneymaking(prenominal) enterprise and management ,8(14), p.36.Ahrendsen, B.L. and Katchova, A.L., 2012. financial ratio analysis using weapons system data.Agricultural pay analyse,72(2), pp.262-272.Al Karim, R. and Alam, T., 2013. An paygrade of financial carrying into action of private commercial banks in Bangladesh ratio analysis. ledger of vexation Studies Quarterly,5(2), p.65.Allen, W.T. and Kraakman, R., 2016.Commentaries and cases on the fair play of business organization. Wolters Kluwer law & business.Babalola, Y.A. and Abiola, F.R., 2013. financial ratio analysis of firms A tool for end making.International daybook of management sciences ,1(4), pp.132-137.Bekaert, G. and Harvey, C., 2017. acclivitous equity markets in a globalizing world.Bobinaite, V. and Tarvydas, D., 2014. financ e instruments and channels for the change magnitude production and pulmonary tuberculosis of renewable vigour Lithuanian case.renewable and Sustainable free push button Reviews,38, pp.259-276.Brigham, E.F. and Houston, J.F., 2012.Fundamentals of financial management . Cengage Learning.Buigut, K., Soi, N., Koskei, I. and Kibet, J., 2013. The effect of capital structure on share price on listed firms in Kenya. A case of energy listed firms.European diary of commercial enterprise and Management ,5(9), pp.29-35.Burns, P., 2016.Entrepreneurship and small business. Palgrave Macmillan Limited.Delen, D., Kuzey, C. and Uyar, A., 2013. cadence firm writ of execution using financial ratios A decision tree approach. dexterous Systems with Applications,40(10), pp.3970-3983.Ehiedu, V.C., 2014. The impact of liquidity on profitableness of some selected companies The financial statement analysis (FSA) approach.Research Journal of Finance and Accounting,5(5), pp.81-90.Elsas, R., Flannery , M.J. and Garfinkel, J.A., 2014. financial support major investments education about capital structure decisions.Review of Finance,18(4), pp.1341-1386.Engel, D. and Stiebale, J., 2014. nonpublic equity, investment and financial constraints firm-level usher for France and the United Kingdom. subatomic Business Economics,43(1), pp.197-212.Fairfield, T. and Jorratt De Luis, M., 2016. assoil income shares, business profits, and legal tax rates in contemporaneous Chile.Review of Income and Wealth,62(S1).Gbandi, E.C. and Amissah, G., 2014. funding options for small and medium enterprises (SMEs) in Nigeria.European Scientific Journal, ESJ,10(1).Gitman, L.J., Juchau, R. and Flanagan, J., 2015.Principles of managerial finance. Pearson Higher learning AU.Higgins, R.C., 2012.Analysis for financial management. McGraw-Hill/Irwin.Lee, N., Sameen, H. and Cowling, M., 2015. Access to finance for innovative SMEs since the financial crisis.Research policy,44(2), pp.370-380.Robb, A.M. and R obinson, D.T., 2014. The capital structure decisions of new firms.The Review of monetary Studies,27(1), pp.153-179.Serrasqueiro, Z. and Nunes, P.M., 2012. Is age a determinant of SMEs financing decisions? Empirical certify using gore data models.Entrepreneurship speculation and Practice,36(4), pp.627-654.Shin, H.S., 2012. Global banking squeeze and loan risk premium.IMF Economic Review,60(2), pp.155-192.Tehrani, R., Mehragan, M.R. and Golkani, M.R., 2012. A Model for Evaluating monetary Performance of Companies by Data enclosure Analysis-A Case take of 36 Corporations machine-accessible with a Private Organization.International Business Research,5(8), p.8.Tugas, F.C., 2012. A comparative degree Analysis of the Financial Ratios of Listed Firms Belonging to the educational activity Subsector in the Philippines for the years 2009-2011.International Journal of Business and hearty Science,3(21).Zeitun, R. and Tian, G., 2014. Capital structure and corporate exploit evidence f rom Jordan.