Vol. 3, Issue 2 (2017)
Analysis of long term debt and financial performance of state owned sugar firms in Kenya
Author(s): Omete F Ikapel, Isabwa Harwood Kajirwa
Abstract: The main purpose of this study was to analyze the effect of long term debt on financial performance of state owned Sugar Firms in Kenya. The Specific objective was to determine the effects of long term debt on financial performance of state owned Sugar Firms. A retrospective research design was used. The SPSS version 20.0 was used for analysis and the Pearson product moment correlation coefficient was used to assess for significant relationship between dependent variable (ROA) and the independent variable, long term debt. A simple linear Regression model was used to identify significant predictors of ROA controlling for confounders. The results are that there is a significant negative relationship between long term debt and financial performance ROA (r = - 0.947, p=0.015, α < 0.05). Long term debt negatively affects ROA although not statistically significant (β1 = -2.615, p =0.100, α > 0.05). The conclusions of the study are that Long term debt negatively affects financial performance. Long term debt is strongly negatively related to financial performance as measured by ROA. We recommend that sugar firms should manage well the portfolio of its long term debt structure to minimize the risks associated with adoption of the various forms of long term debt.