Journal of Business and Behavioral Sciences Volume 23, Number 1 issn 1946-8113 Spring 2011 inthis issue

Variables

Intercept

STD/TA

LTD/TA

/JD1

/LD2

/LD3

/LD4 /ID5 /LD6 /LD7 /ID8 /LD9 AD10 AD11 AD12

Coefficients	T-statistics
10.0	9.0
-15.0	-9.0
-10.0	-6.0
0.043	1.27
0.046	1.38
0.061	1.53
0.007	-0.22
0.031	-0.92
0.018	0.54
0.056	-1.62
0.043	1.30
0.011	0.34
0.039	1.16
0.016	0.48
-0.009	-0.27

on investment during sample period with the variation 12 percent. Tangible assets on average are 61 percent with the variation of 20 percent. Theoretically, firms with higher optimal level of debt financing should increase return on equity and strengthen the firm financially. But sugar industry‘s worst financial position (negative equity) indicates suboptimal use of debt. Normally companies go for long term debt financing besides equity financing and less relay on short term debt so that the firm need not to arrange debt after every short term interval. One reason that my be assigned to more short term financing and less long term debt and equity percentage is the industry‘s weak financial position where lender and investors have no confidence on industry‘s long run performance and have a fear of loosing money. Analysis of the industry‘s investment in assets (expansion), growth in sales, owner‘ equity, short term and long term debt, operating profits and profit before taxes over the sample period indicat that industry assets have an increasing trend, it almost doubled during the sample period that shows an expansion in industry. This expansionis is mostly financed through debt. Sales also show an increasing trend during sample period. When assets base increased, and sales increased, why profit could not increase? Operating profit trends are highly volatile, there could be instability in operating expenses and if we look at the profits before taxed, it seems to be managed in spells; one spell of profit is offset by the other spell of loss hence averaged to zero profit for tax purposes. When operating expenses are unjustifiably increased, the existing owners get private benefits and deprive off the minority shareholder from their due benefit and to government cause losses in term of taxes. The analysis leade towards the distrust on published accounting information. Operating and other expenses need thorough scrutiny to bring industry in tax net and profit sharing with minority shareholders. This will bring efficiency in financial performance and attract investors, hence industry will flourish and society would be able to get benefits.

Journal of Business and Behavioral Sciences