Abstract
This paper examines the use of financial analysis as a strategic tool in SMEs. Empirical data are collected from 303 SMEs in the Republic of Kosova, operating in production, trade and service sectors. The aim of this study is to assess the extent to which the business financial analysis is employed in the sampled enterprises and to determine whether there are differences in the usage of it, within small and medium-sized enterprises and sectors. The results show that Kosovan SMEs greatly use financial analysis as a strategic tool. Moreover, significant differences are found between small and medium-sized enterprises regarding its usage and no significant differences among production, trade and service sectors. This paper contributes to the existing scientific literature, especially in the strategic management field. Additionally, this paper will likely contribute to decision makers’ increased use of business financial analysis as a strategic tool in their enterprises.
Highlights
Strategic management has a long history, the words used to describe it have changed several times as the concepts have been modified and developed (Hussey 1998)
Secondly: it pinpoints the usage of financial analysis as a strategic tool by different sized enterprises and sectors in the Republic of Kosova as a transition economy
The results show that Kosovan SMEs highly use financial analysis as a strategic tool
Summary
Strategic management has a long history, the words used to describe it have changed several times as the concepts have been modified and developed (Hussey 1998). One of the most comprehensive definitions of strategic management is that of David (2011: 6) who defines strategic management, “as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. As this definition implies, strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and information systems to achieve organizational success”. David and David (2017) highlight that firms with management systems that utilize strategic-planning concepts, tools, and techniques generally exhibit superior long-term financial performance relative to their industry. All of these tools and techniques are prescriptions that are supposed to make it possible to choose improved organizational outcomes and results well in advance of acting (Stacey 2012). David and David (2017) highlight that firms with management systems that utilize strategic-planning concepts, tools, and techniques generally exhibit superior long-term financial performance relative to their industry. Helfert (2001) emphasized that financial analysis is an essential toolkit for analytically oriented persons of any viewpoint, as they judge the financial/economic performance and outlook of any business
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