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This research aimed to investigate the influence of liquidity on the determination of capital
structure in brewery industry of Tanzania. In order to achieve the general objective, the
collection of data was guided by three specific objectives and two research hypotheses. TBL
was selected as representative sample out of two breweries operating in the country because it
is a listed company operating within the country. Secondary data was used as a data collection
method. DSE was a major tools for data collection, were the company’s financial statements
were extracted. Correction analysis was performed to investigate the relationship between
liquidity and capital structure while accounting ratios; current ratio and debt ratio were
calculated so as to assess the capital structure and liquidity of the breweries. OLS method of
estimation was adopted to estimate the regression model specified in the study and STATA
software was used to analyze the data. The observed results show that there is a significant
negative relationship between liquidity and capital structure thus concludes that, brewery
companies in Tanzania have a good liquidity position as the result, these firms tends to refer
internal capital to finance their total assets. The study further suggests that, firm characteristic
of liquidity have an impact on firms’ long term financing decision. The study therefore
recommends that, managers should be able to manage well the current ratio and debt ratio for
a sound firm’s capital structure. |
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