Chapter 2

METHODOLOGY

Research design

This study will use correlational design which is defined as a relationship between two

variables. It is concerned with establishing relationships between two or more variables in the

same population or between the same variables in two populations (Leedy & Ormrod, 2010). It

Seeks to establish a relation or association between two or more variables that do not readily lend

themselves to experimental manipulation (Brabete et al.,2010).

This design will be used to determine the relationship of capital structure and profitability

of small and medium enterprises. The relationship of the various variables is significantly part of

Small and Medium Enterprises in the City of San Fernando, La Union.

Giving importance to the nature of the study correlational design is the best method that

suits this study because it can collect much information from many subjects at one time.

Data Sources

This study involved the managers, supervisors, and employees in small and medium

enterprises in the City of San Fernando, La union. Based on the Business Permit and Licenses

Office (BPLO) data in 2017, there are 1663 registered enterprises in the City Of San Fernando,

La Union. Table 1 show that in 2017 there are 1,283 registered small enterprises, 380 medium

enterprises. A sample of 498 was drawn using the Slovin’s formula.

Table 1

Registered Small and Medium Enterprises in the City of San Fernando, La Union as of 2017.

SME REGISTERED SAMPLE POPULATION

ENTERPRISES

Small 1,283 304

Medium 380 194

Total 1,663 498

Instrumentation and Data collection

The researchers used a survey questionnaire to collect data. The questionnaire has three

(3) parts; the first part delves on the capital structure of small and medium enterprises; second is

on factors of profitability; Third part is on the correlation of capital structure and profitability to

ascertain its positive and negative relationship and to assess its impact to small and medium

enterprises.

The researchers will use an interval scale type of questionnaire. The respondents will

indicate the extent of effectiveness into the following statements by circling the appropriate

number of descriptive equivalent; respondents were asked to rate 15 statements as 1= strongly

not effective; 2= not effective; 3= neither effective nor not effective; 4= Effective; and

5=strongly effective.

Prior to the data collection, researchers sought permission and consent to provide

necessary documents and information. For the corresponding respondents the researchers will

provide specific questionnaires that will suit and give the right answers to the research problems,
it will be given or distributed to the respondents by personal delivery, then the researchers will

tally the results and use the data for the research.

The Researchers assured confidentiality of their survey sheets. The researchers also

understood that people’s consciousness may also affect their honesty and effectiveness in

answering the survey, and so, the researchers will give the people the option of being

anonymous. Participants will be given time to respond and the researchers will collect the survey

questionnaire on the following day.

Data Analysis

This study will use survey-questionnaire method as the statistical tool in order to analyze

the effect of capital structure and profitability to small and medium enterprises in the City of San

Fernando, La Union.

To determine the factors of capital structure and profitability, effect of capital structure to

profitability, and significant correlation of capital structure and profitability. In analyzing these

quantitative data, the researchers will be using median.