Effect of Financing Structure on the Profitability of Micro and Small Enterprises in Nakuru Central Business District

Financing a business is among the steps towards achieving firm objectives. Having a proper financing structure is the key to the successful performance of an enterprise. Existing literature about financing structure and profitability of MSEs reveals contradicting results. This study sought to assess the effect of financing structure on the profitability of micro and small enterprises in Nakuru central business district (CBD).Specific objective was to establish the effect of retained earnings on the profitability of micro and small enterprises. The study adopted a descriptive survey research design. The target population was 1,249 MSEs located in the Central Business District. A systematic random sampling technique was used in the picking of the respondents; every Kth MSEs became part of the response group. Simple regression was applied in establishing the cause-effect of each of the independent variables to the dependent variable. The study revealed that there is a statistically significant relationship between the financing structure and profitability of MSEs. Retained earnings have a significant positive effect on profitability at a 5% level of significance. The study concluded that the financing structure significantly affects the profitability of micro and small enterprises in Nakuru central business district.