ISSN 2736-1721
Global Journal of Business Management ISSN 6731-4538 Vol. 6 (5), pp. 001-008, May, 2012. © International Scholars Journals
Full Length Research Paper
Does debt really matter on the profitability of small firms? A perspective on small manufacturing firms in Bulawayo, Zimbabwe
Matarirano Obert1 and Fatoki Olawale2*
1Department of Accounting, University of Fort Hare, South Africa.
2Department of Business Management, University of Fort Hare, South Africa.
Accepted 18 October, 2011
Abstract
Small firms are the engines for economic development of several developed countries such as the US and Japan. Developing countries such as Zimbabwe have also identified the potential of small firms to turn economies with negative growth into vibrant ones. For this reason, several governments in developing countries offer funding to small firms either directly or by guaranteeing the payment of such loans as lack of funding is cited as one of the major challenges faced by small businesses. Due to limited resources by governments, not all small firms receive funding from the government, therefore, the other option would be to go for bank loans. The aim of this paper was to investigate the impact of debt on the profitability of small manufacturing firms in Zimbabwe. The results indicated that the use of debt has a negative impact on the profitability of small manufacturing firms. The study recommended the creation of tax incentives and more equity funding for small manufacturing firms
Key words: Debt, profitability, small manufacturing firms.