Capital structure and profitability: An empirical analysis of public companies of botswana in tourism industry

Forming a better capital structure is a vital decision for firms which want to utilise the resources, maximise the profit and have efficient performance. Though there is no universally acceptable ratio between debt and equity, the directors are responsible to create effective capital structure for their firm and industry. Tourism plays a vital role in Botswana's economy as it is one of the sources of high income and demonstrates immense potential for future growth. The researchers selected all tourism companies that are listed on Botswana stock exchange. Quantitative research method was used to find out the relationship between capital structures (CS) and profitability. Seven years data were collected from the firms ’authorised websites and analysed using various ratio techniques, descriptive statistics and Pearson correlation. The study showed that the debt equity ratio had a significant negative relationship with ROA, NPR and TDR. It revealed that the firms in Botswana tourism prefer to finance their businesses through equity capital than borrowing capital to avoid the cost and risks of borrowing.