The Effect of Debt Financing on the Profitability of SMEs in Accra Metropolis

The Effect of Debt Financing on the Profitability of SMEs in Accra Metropolis

Charles Asare and Peter Lawer Angmor

Debt financing plays a pivotal role in the success of both large and small businesses since it affect their profitability and solvency. The aim of this study is to examine the effect of debt finance on the profitability of SMEs within the Accra Metropolis in Ghana. The study used secondary data collected from 50 SMEs in the Metropolis covering the period from 2004-2013. Profit margin ratio and return on assets were used as measurement of profitability whiles trade credit, short-term loan ratio and long-term loan ratio were used to represent debt finance. The study found short-term loan ratio to have a significant negative relationship with both profit margin ratio and return on assets. However, a positive insignificant relation was found between long-term loan ratio and profit margin ratio but an insignificant negative relation was established with return on assets. Furthermore, a positive insignificant relationship was established …

Africa Development and Resources Research Institute

2015

https://scholar.google.com/citations?view_op=view_citation&hl=en&user=FZkijXgAAAAJ&citation_for_view=FZkijXgAAAAJ:2osOgNQ5qMEC

English