Vol. 4, Issue 3 (2017)
Effects of capital structure choice on profitability of oil marketing companies in Ghana (OMCs): Case studies of Ghana Oil Company limited and total petroleum Ghana limited
Author(s): Dr. Patrick Baah-Acquah1, Emmanuel Freeman, Ebenezer Perry Ellis
Abstract: Capital structure is actually a mix of different securities. The importance of capital structure cannot be over emphasized since it impacts on firm’s value. Capital structure choices have had significant impacts on shareholders wealth. The study investigated the impact of capital structure on the profitability of Oil Marketing Companies (OMC’s). With regards to the firm’s capital structure, the study employed short-term debt to total capital, long-term debt to total capital and total debt to total capital in comparison with return on assets (ROA), return on equity (ROE) and net profit margin (NPM). The study employed secondary data and the data was analysed using multiple regressions. The result reveals that short term debt to total capital, long term debt to total capital, total debt to total capital, firm size, and sales growth, have varying and mixed relationships with profitability in terms of return on asset, and return on equity of the Oil Marketing Companies (OMC’s). The study recommend that companies implement due diligence in considering debt financing decisions, to come out with the best possible financing blend which will maximize profitability for their companies.