A COMPREHENSIVE STUDY ON THE FINANCIAL STRUCTURE OF MSMES IN CHITTOOR AND PRAKASAM DISTRICTS' GRANITE INDUSTRY

Abstract

The granite industry in Chittoor and Prakasam districts of Andhra Pradesh, India, plays a significant
role in the economic development of these regions. However, the majority of micro, small and medium
enterprises (MSMEs) in the industry are suffering from heavy losses due to inadequate financial structure, as
they do not maintain the standard debt-equity ratio. To explore the source of finance and financial structure of
MSMEs in the granite industry, this study aims to identify the ability of entrepreneurs to access financial
assistance and to offer suggestions to maintain an optimal capital structure. The literature review highlights
different views regarding the relationship between capital structure and firm performance. The study uses both
primary and secondary data, including a sample of 223 granite enterprises in the study area, and analyzes the
data using statistical tools such as mean, standard deviation, and chi-square tests. The study finds that a sound
capital structure is critical for MSMEs in the granite industry to maximize returns with minimum risk. To
achieve this, enterprises should increase their debt to maintain the standard debt-equity ratio and optimal
capital structure, as long as they can utilize the debt or risk facing financial risk. The research provides useful
insights into the financial dynamics of MSMEs in the granite industry, highlighting the need for a sound capital
structure to maximize returns and minimize risk.