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Exploring the Relationship between Capital Structure and Financial Performance in Rwanda Manufacturing Firms: Case of Cimerwa PLC (2019-2023)

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Exploring the Relationship between Capital Structure and Financial Performance in Rwanda Manufacturing Firms: Case of Cimerwa PLC (2019-2023)


Aimable Nyirimana | Prof. Isaie Kadhafi Misago



Aimable Nyirimana | Prof. Isaie Kadhafi Misago "Exploring the Relationship between Capital Structure and Financial Performance in Rwanda Manufacturing Firms: Case of Cimerwa PLC (2019-2023)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-9 | Issue-4, August 2025, pp.1139-1189, URL: https://www.ijtsrd.com/papers/ijtsrd97403.pdf

This study examines the relationship between capital structure and financial performance at Cimerwa Plc for the period 2019 to 2023. The problem addressed in this research is the lack of comprehensive understanding regarding how capital structure decisions, particularly the mix of debt and equity, affect the financial performance of manufacturing firms in Rwanda. This gap in knowledge is particularly critical for Cimerwa Plc, a leading cement manufacturer, which relies on optimal capital structure for its financial stability and growth. The primary objectives of the study were to analyze Cimerwa’s capital structure, assess its financial performance over the period under study, and determine the nature of the relationship between capital structure and financial performance. This study is grounded in three key theories: the Trade-Off Theory, which suggests that companies balance the benefits of debt (such as tax shields) against the potential costs of financial distress; the Pecking Order Theory, which posits that firms prefer internal financing over external financing sources; and the Agency Theory, which addresses conflicts of interest between managers and shareholders that can lead to suboptimal capital structure decisions. These theories provided the framework for understanding how capital structure affects financial performance, particularly in the context of manufacturing firms in Rwanda. The study adopted a quantitative research design, using a sample size of 40 observations from the company’s annual reports and interviews with industry experts. Data collection methods included documentary analysis of financial records and expert interviews to capture both secondary data and qualitative insights. Multiple linear regression analysis was used to test the relationship between capital structure variables (debt ratio, equity ratio, and financial leverage) and financial performance indicators such as Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS). The findings of the study indicated a significant positive relationship between capital structure and financial performance. The regression model showed an R value of 0.791, indicating a strong positive correlation between the independent variables and Cimerwa's overall financial performance. The R Square value of 0.625 suggests that approximately 62.5% of the variance in Cimerwa's financial performance can be explained by the capital structure variables included in the model. The Adjusted R Square value of 0.603, which adjusts for the number of predictors, indicates that the model still explains a good portion of the variation in the dependent variable, highlighting the relevance of these predictors. Furthermore, the F Change statistic of 178.171, with a Sig. F Change value of 0.000, confirms the statistical significance of the model, demonstrating that capital structure decisions have a significant impact on Cimerwa's financial outcomes. Based on the findings, the study recommends that Cimerwa Plc adopt a more structured approach to its financing strategy, focusing on maintaining an optimal balance between debt and equity. This would minimize financial risks while maximizing returns. Additionally, continuous monitoring of financial performance, strategic debt management, and improved liquidity management are essential for sustaining long-term growth and financial stability.

Capital Structure, Financial Performance, Return on Equity, Debt Ratio, Cimerwa Plc.


IJTSRD97403
Volume-9 | Issue-4, August 2025
1139-1189
IJTSRD | www.ijtsrd.com | E-ISSN 2456-6470
Copyright © 2019 by author(s) and International Journal of Trend in Scientific Research and Development Journal. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (CC BY 4.0) (http://creativecommons.org/licenses/by/4.0)

International Journal of Trend in Scientific Research and Development - IJTSRD having online ISSN 2456-6470. IJTSRD is a leading Open Access, Peer-Reviewed International Journal which provides rapid publication of your research articles and aims to promote the theory and practice along with knowledge sharing between researchers, developers, engineers, students, and practitioners working in and around the world in many areas like Sciences, Technology, Innovation, Engineering, Agriculture, Management and many more and it is recommended by all Universities, review articles and short communications in all subjects. IJTSRD running an International Journal who are proving quality publication of peer reviewed and refereed international journals from diverse fields that emphasizes new research, development and their applications. IJTSRD provides an online access to exchange your research work, technical notes & surveying results among professionals throughout the world in e-journals. IJTSRD is a fastest growing and dynamic professional organization. The aim of this organization is to provide access not only to world class research resources, but through its professionals aim to bring in a significant transformation in the real of open access journals and online publishing.

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