Inventory management, managerial competence and financial performance of small businesses

Abstract

PurposeThe purpose of this study is twofold (1) to establish the relationship between inventory management, managerial competence and financial performance and (2) to test whether inventory management mediates the relationship between managerial competence and financial performance.Design/methodology/approachWe employed cross-sectional and correlational research designs. A questionnaire survey of 304 small businesses in Uganda was utilized. Hypotheses were tested using a bootstrap analysis technique with the aid of Analysis of Moments Structures (AMOS) software.FindingsResults indicate that inventory management and managerial competence are significantly associated with financial performance of small businesses. Further, inventory management partially mediates the relationship between managerial competence and financial performance.Originality/valueRather than focusing on only the direct effects of managerial competence and inventory management, moreover independently, the indirect effect of inventory management is tested. Further, the behavioral perspective of inventory management, as opposed to financial ratios, is utilized.