Directions:

Submit a Word Document that would include the following components:

Title of the project

Effects of capital structure on the financial performance of Energy America Firms

A paragraph-long problem statement.

Firms may decide to raise funds either through equity or debt or a combination of both equity and debt. The specific mixture of long term debt and equity the firm uses to finance its overall operations and growth is what is referred to as capital structure. Both sources of funds come with a price that the company must pay to obtain or retain finance for its operation's known as cost of capital .The cost of capital is significant as a standard for evaluating investment decisions designing firm debt policy and appraising the financial performance of top management . Companies like to issue debt because of the tax interest deductible advantages. Debt also allows a company to retain ownership unlike equity .In addition during low interest rates debt is abundant and easy to access However borrowing has a disadvantage associated with the cost of financial distress including bankruptcy and non-bankruptcy costs such as staff leaving , suppliers demanding disadvantageous payment terms among others .On the other hand equity is more expensive than debt when interest rates are low and does not need to be paid back However equity represents a claim on the future earning s of the company as a part owner . A firm's debt to equity ratio provides insight into how risky a corporation is. Often a company that is heavily financed by debt has a high leverage ratio and a more aggressive capital structure and thus possess greater risk to investors. The risks however may be the primary source of the firm's growth a company that pays for the assets with more equity than debt has a low leverage ratio and a conservative capital structure. A high leverage ratio can lead to high growth rate while a low leverage ratio leads to lower growth rate hence it is essential for a company to determine the optimum, capital structure mix to finance its operations.

Decisions relating to Capital Company financing on the macro level have implications for capital market development, interest rate, security price determination and regulation. At the micro level such decisions affect capital structure, corporate governance and company development (Miglo2016). While firms in developed economies operate in close to similar economic conditions, each economy has different determinant of capital structure is therefore necessary to identify factors in the American context with an eye on the different variables and dynamics that shape the capital structure decisions. 80% of the studies which have been conducted over the past few years to explain the relation between capital structure and performance give varied and conflicting results.

A resent national economic survey reported by the Federal Reserve indicated that energy firms create 30 % of the jobs annually as well as contribute 5% GDP. It is important that a firm chooses an appropriate capital structure that will enable it achieve financial performance as it competes in an increasingly challenging business environment if energy firms are expected to continue their immense contribution to the American economy hence the need for further research.

A link to a dataset(s) you will be using to study the problem.

The entire population of 30 energy firms will be studied using a stratified random sampling and secondary data from annual financial records of the Energy American Firms from Mergent online will be used for collection of data. Annual financial statement reports from the Energy American firms will be used ranging from 2017-2021 .Data analysis will be conducted through descriptive and inferential statistics.

Use the below link data set

https://www.mergentonline.com/ to find the financial statement reports of American Energy firms from 2017-2021

List of at least three hypothesis or research questions

The study will test the mentioned bellow research hypothesis

Ho1 There is no significant effect of equity financing on financial performance of Energy American Firms:

Ho2 There is no significant of debt financing on financial performance of Energy American firms

Ho3 There is no significant effect of debt to equity ratio on financial performance of Energy American firms

For each hypothesis list a suggested method to test it and the reason of choosing the method. You should use at least two different methods out of the following list: Regression analysis, Factor analysis, Propensity Score Matching, Classification, Cluster Analysis, Decision trees.

This study will use return on equity (ROE) and return on assets (ROA) as dependent variables for measuring firms' profitability while capital structure variables used were debt to equity ratio, long term debt and short term debt. The data will be analyzed using multiple regressions and cluster analysis as explained below

Ho1There is no significant effect of equity financing on financial performance of Energy American Firms:

This hypothesis will be tested using regression analysis

Regression analysis will be used because the method in identifying the extent of the equity financing impact on profitability of the energy firms. The regression analysis helped to conclude which factors matter most, which factors can be ignored, and how these factors influence each other.

Ho2 There is no significant of debt financing on financial performance of Energy American firms

Cluster analysis will be used to test this hypothesis. This is because clustering will help to identify and group similar data points in larger data sets without caring much for what the overall outcome will look like. Data will be classified into structures that can be easily understood and manipulated.

Ho3 There is no significant effect of debt to equity ratio on financial performance of Energy American firm

Regression analysis will be used because the method in identifying the extent of the equity financing impact on profitability of the energy firms. The regression analysis helped to conclude which factors matter most, which factors can be ignored, and how these factors influence each other.

Your initial post should include:

• A short (5 minutes max) video or voice-over recording of slide presentation briefly discussing:
  1. What was the problem you were solving?
  2. What were the methods you were using?
  3. What are the main results and conclusions?
  4. Reflect on your learning experience while working on this assignment. What you have learned and what challenges you had to fight.

Make sure that your video or presentation has subtitles (if you use YouTube you can create them automatically).

• Short summary of the video (text)
• Attach you full project report submission as an attachment to your post.