This study compares how the debt capital of the listed companies operating in the wholesale and retail sectors of South Africa and Sri Lanka affect their financial performance. Objective of this study is to examine whether debt capital affects the financial performance of the wholesale and retail sector companies in South Africa and Sri Lanka. To examine the impact of debt financing on financial performance of companies over the 2011-2015 period. Fixed-effects (within) regression model was used.The findings the study confirms that debt financing, in terms of short-term debt and long-term debt, has a negative impact on the financial performance of wholesale and retail sector companies in the context of South Africa. In Sri Lanka, debt financing, in terms of short-term debt has a negative impact on firm performance, while long-term debt has a positive impact. This study gives special focus to identify in which industries do different components of the capital structure have significant impact or weak-to-no impact on firm performances.This suggests for the South African wholesale and retail sector can use equity capital and retained earnings efficiently, thereby minimizing conflicts of agency or agency costs and remaining independent of external financiers. In the case of Sri Lanka, the owners and managers of the retail companies should consider reducing the use of short-term debt and increase long-term debt capital as long-term debt seems to influence their financial performances positively.