CAPITAL STRUCTURE AND PROFITABILITY OF SOVEREIGN INVESTMENT GROUP LIMITED, UGANDA

Abstract

The aim of this study is to ascertain the nature of capital structure employed in Sovereign Investment Group Limited so as to assess the level of profitability of Sovereign Investment Group Limited, and to establish the relationship between capital structure employed and profitability of Sovereign Investment Group Limited. The research study used both qualitative and quantitative approaches of data collection with descriptive and correlation designs. The descriptive design allowed the researcher to describe the capital structure of Sovereign Investment Group Limited. The researcher used correlation design to determine the relationship between Capital Structure and Profitability of Sovereign Investment Group Limited. The researcher used questionnaires supported by document analysis to collect data from the selected respondents. Both descriptive statistics and Pearson Correlation were used in analyzing data and reporting the study results. A sample of 70 respondents was used in the study. It was concluded that both equity and debt are employed at a low level, meaning that there is under investment in Sovereign Investment Group Limited and it may be attributed to some of the determinants of capital structure in an organization such as firm size. Further the results indicated that the level of profitability in Sovereign Investment Group Limited is low. This implies that the companies are not generating enough profits from their investments thus not having enough funds to expand their businesses. However, from the Pearson Correlation table the results indicate that there is a strong relationship between capital structure and profitability of sovereign investment group limited at correlation coefficient r = 0.794. The null hypothesis which stated that there is no significant relationship between capital structure and profitability of Sovereign Investment Group Limited was therefore rejected and the alternative one was accepted. The study made practical recommendations to Sovereign Investment Group Limited, Firms in Uganda and Professional and Qualified Personnel in various fields of finance, and suggestions for further research was made as well.