Profitability Of Small And Medium Enterprises Research Articles

Effect of Turnover Tax on Small and Medium Enterprises’ (SMEs) Growth in the Clothing Retail Industry: A Case Study of Lusaka

Taxation plays an important role in the development of every economy as well as the growth of Small and Medium Enterprises (SMEs). The purpose of the study was to evaluate the effect of turnover tax on the growth of small and medium enterprises in Lusaka and the specific objectives were; to establish the significant effect of tax incentives on SME growth in the Zambian retail sector; to find out whether the Zambian tax system espouses the basic principles of “efficiency” and “equity” in the retail clothing industry; and to assess the effect of tax policies on SMEs business profitability in the retail clothing industry.The approach adopted was mixed method. This study was based on a survey of 72 selected clothing retail stores out of the available 4433 retail businesses in Lusaka.The sampling technique applied in this research wasjudgmental sampling. The survey was administered using 72 questionnaires which had a 100% return rate. Data was analyzed through descriptive statistics, correlation and regression analysis and findings were presented in terms of frequencies and percentage analysis.The results demonstrated that tax incentives stimulate the growth of the business. It was also ascertainedthat ‘equity and fairness’ does not seriously affect the growth sort after by SMEs in the clothing retail industry.Additionally, this studyestablished that turnover tax significantly affects the profitability of SMEs in the clothing retail industry negatively. The study recommends that government should implement innovative incentives and enhancing policies that could help businesses deal and cope with uncertainties and different macroeconomic situations. It was also suggested that policy makers shouldsimplify the taxadministration systems to make it easier for taxpayers to pay taxes willingly and easily. Furthermore, the government through the relevant line agencies should provide an enabling environment and social services that support business profitability. This paper, therefore, is a strong line of policy advocacy on the imperative need for government through the Ministry of Finance and National Planning along with its line agencies to entrench tax policy incentives (not only in respect to the subject matter subsector of this study)which do not only incentivize the SMEs ecosystem but equally give growth, sustainability and profitability of these entities for the overall socio-economic development of the nation. This is the surest way of guaranteeing job creation, poverty and inequality reductions amongst the masses of Zambia, who are lamentably wallowing in the paradox of abject poverty in the land of plenty.

Financing Challenges of Cameroon’s Small and Medium Enterprises (SMEs)

Cameroon’s small and medium enterprises (SMEs) are vital contributors to economic growth and employment opportunities, making its sustained success imperative. However, SMEs grapple with a myriad of issues that impede their development trajectory. Challenges related to financial access, profitability, resilience, and growth are intertwined and necessitate a holistic examination. One significant challenge is the limited access to financing options, hindering SMEs from investing in growth and innovation. Investigating the effectiveness of government policies and financial institutions in facilitating SME access to capital is crucial. Furthermore, market dynamics, cost structures, and competition often constrain SME profitability. Research can illuminate strategies to enhance profitability through efficiency and value creation. SME survival in Cameroon’s dynamic business environment demands an exploration of the barriers and the challenges. This inquiry explores these complexities by exploring the literature through current and emerging literature. The aim is to shed light on the dynamics of small business financing in Cameroon to create a research discussion that other researchers and policymakers will build on.

A Comparative Study of Remote Work and In-Person Work among SMEs in the Services Sector: A Survey Approach

In the wake of the COVID-19 pandemic, remote work has become a widespread phenomenon, affecting various sectors of the economy, including the services sector. This paper examines the effects of remote work and in-person work on productivity, profitability, satisfaction, and challenges faced by small and medium enterprises (SMEs) in the services sector. The paper employs a survey methodology to gather data from 200 small and medium-sized enterprises (SMEs) operating in the services sector across India, who have opted for remote work or in-person employment during the pandemic. To analyze the data and test the hypotheses, the paper employs descriptive statistics, correlation analysis, and regression analysis. In the paper, it is found that remote work has a positive impact on the productivity and profitability of SMEs in the services sector, but also poses some challenges such as communication difficulties, cyber-security risks, and work-life balance issues. In addition, the paper finds that in-person work has a positive impact on the satisfaction and motivation of SMEs in the services sector, but also exposes them to health risks and operational costs. The paper concludes by presenting some recommendations for small and medium-sized enterprises operating in the services sector to effectively address the challenges of remote work and in-person work, and to capitalize on the potential offered by both forms of employment.

Intellectual capital and performance: evidence from SMEs in Vietnam

PurposeThis paper investigated the relationship between intellectual capital (IC)/its components, and the business performance of Vietnamese small and medium enterprises (SMEs).Design/methodology/approachThe panel data set was obtained from the Vietnam SME database. Using the value-added intellectual coefficient (VAIC) approach for IC measurement, this paper employs various panel data estimation approaches, including fixed effects (FE) and the generalized method of moments (GMM), to examine the relationship between IC and the financial performance of SMEs in Vietnam.FindingsThe result suggests that the value creation activities of SMEs in Vietnam mainly occur on the basis of physical and financial capital. In other words, the findings indicate that Vietnamese SMEs mainly depend on physical and financial capital to profit: they have not fully utilized their human capital and structural capital, two main components of IC for value creation.Practical implicationsThe results underline the urgency of effective management of tangible and IC to boost the utilization of human and structural capital to increase the profitability of Vietnamese SMEs. The results lead to suggesting a series of policy recommendations to achieve the objective.Originality/valueThis paper is the first to examine the relationship between IC and the financial performance of SMEs in Vietnam, contributing to the literature on IC in emerging countries.

Trade Credit Management and Profitability of Jordanian Manufacturing Firms

The significant role of Small and Medium Enterprises (SMEs) in the growth of the economy has been well-documented in the past few decades. Studies in literature have focused on the reasons behind the trade credit offerings and acceptance of SMEs, but empirical findings revealing the positive relationship between trade credit itself and profitability is still limited. Thus, in this paper, the trade credit effect on the profitability of SMEs from the side of supply and demand is examined. The paper focused on 38 SMEs in Amman Stock Exchange (ASE) for the years from 2009 to 2021. The obtained findings showed a positive relationship between accounts payable and profitability, which indicates that SMEs should establish long-term relationships with their suppliers to maintain credit. However, no clear relationship was found between accounts receivable and profitability, represented by ROE and ROA. Furthermore, financial leverage and size were revealed to impact the profitability of SMEs.

Capital structure, profitability, and short-term solvency of nascent SMEs in Ghana: An empirical study

PURPOSE: Small and medium enterprises (SMEs) play a vital role in the economic growth of emerging economies. However, many of these businesses fail in their early stages, making it important to investigate factors that influence their short-term solvency. This study aims to examine the impact of capital structure and profitability on the short-term solvency of nascent SMEs in Ghana, building on the liability of newness framework. METHODOLOGY: Data for this study were obtained from the Ghana Enterprises Agency, focusing on nascent SMEs that are five years old or less. Financial statements were used to measure the dependent and independent variables, and regression analysis was employed to measure the variance in short-term solvency accounted for by profitability and capital structure. FINDINGS: This study demonstrates that financing decisions and financial performance act as crucial mitigating factors for the potential risks of default and failure faced by nascent SMEs. Notably, the study finds that an appropriate balance between debt and equity financing raises the working capital ratio and thus reduces the liability of newness, which is a major challenge faced by nascent SMEs. This highlights the relevance of the trade-off theory, which recommends a combination of debt and equity financing to leverage the advantages of both sources of capital, in the context of nascent SMEs. The intricate relationship between profitability and short-term solvency in nascent SMEs was revealed in this study. The findings illustrate that while return on equity exhibits a direct impact on the short-term solvency of such SMEs, return on assets manifests an opposing effect. Furthermore, net profit after tax demonstrates only a nominal influence on the short-term solvency of nascent SMEs in Ghana. IMPLICATIONS: The implications of our study are far-reaching, particularly within the context of Ghana’s nascent SMEs. To ensure short-term viability and facilitate a smooth transition to maturity, nascent SMEs must strive for an optimal debt-to-equity ratio. This critical insight underscores the importance of managing the capital structure of nascent SMEs, as the improper balance between debt and equity may impede the achievement of short-term solvency and, in turn, hinder the long-term success of the firm. Additionally, while nascent SMEs must prioritize maintaining liquidity to safeguard against unforeseen contingencies, this comes at a high cost in terms of missed opportunities that could significantly enhance the company’s long-term return on assets. Thus, it is crucial for small business owners in Ghana to strike a balance between short-term solvency and return on assets by engaging in prudent financial management practices. Overall, our study provides valuable theoretical and practical implications for nascent SMEs in Ghana, emphasizing the need to optimize their capital structure and maximize their long-term return on assets while safeguarding their short-term liquidity. ORIGINALITY AND VALUE: The study’s conceptualization that capital structure and profitability relate significantly to short-term solvency and, therefore, buffers the liability of newness is novel. Second, by showing that the trade-off theory’s tenets are relevant to the short-term solvency of nascent SMEs, the study demonstrates that capital structure theories apply equally to SMEs, just as much as large firms.

The Effects of Proper Inventory Management on the Profitability of SMEs

A business must have or be able to generate enough cash and cash equivalent to meet its short-term liabilities if it is to continue and grow in business. Therefore, working capital management which helps an entity to, efficiently and effectively control current assets and liabilities is a key factor in the company’s long-term success; without working capital, the non- current assets will not function. The greater the extent to which current assets exceed current liability, the more solvent or liquid a company is likely to be. This paper observes the relationship between working capital management practices of small and medium enterprises (SMEs) and the performance and profitability of these businesses in the Kumasi Metropolis , to evaluate inflows and outflows of inventory to determine the rate at which certain goods are purchased in relation to others. This practice will also help ascertain seasons and times during which certain products experience higher demand and vice versa. This will reduce their over and/or under investment in inventories. The implication of the findings is that the government of Ghana should pursue policies aimed at encouraging training and improving the managerial skills of SME owner/managers as well as creating the enabling environment for the development of improved modern technologies to transform the business processes of these vital industries.

Green marketing and perceived SME profitability: the meditating effect of green purchase behaviour

PurposeThe concept of green marketing has emerged as a panacea for reducing the negative impact of business activities on the environment. Many studies have investigated the impact of green marketing on green purchase behavior, sustainable competitive advantage, etc., without much being explored about how green marketing translates into firms' profitability, particularly among small and medium enterprises (SMEs) in emerging markets. This study, therefore, investigates the influence of green marketing on perceived SME profitability alongside the mediating effect of green purchase behaviour.Design/methodology/approachA quantitative research approach was adopted, where a cross-sectional survey design was employed to collect the data from 400 SME owners/managers in Ghana. Using Statistical Package for Social Science, the data were analysed through descriptive statistics, correlation and macro Process version 3.4.1.FindingsThe results reveal that the dimensions (environmental knowledge, environmental concern, green price, green advertising and green product) of green marketing distinctively have significant positive effect on perceived SME profitability as well as green purchase behaviour. Furthermore, green purchase behaviour significantly mediates the relationship between green marketing dimensions and perceived SME profitability such that the indirect effects are far greater than the direct effects.Practical implicationsSME managers should include the green marketing dimensions in their business plans and develop strategies to implement them in order to enhance green purchase behaviour of their products and services which will, in turn, lead to profitability.Originality/valueIn augmenting green marketing literature, this study provides an insight into how SMEs can leverage on the distinct dimensions of green marketing to influence green purchase behaviour and profitability in an emerging market context.

Working capital management and firm profitability: Evidence from SMEs in Malaysia

Efficient working capital management is particularly important for Small and Medium Enterprises (SMEs) in coping with greater difficulty in accessing capital market. In this research, we investigate the importance of working capital management to SMEs by analyzing the influence of working capital management and its components (inventory, accounts receivable and account payable) to profitability of SMEs. By using a sample of SMEs listed on the ACE market – an alternative, sponsor-driven equity market designed for Malaysian SMEs during the period from 2010 to 2016, our findings suggest that managers of Malaysian SMEs can enhance profitability by holding a large amount of inventory, offering more trade credit to customers, and lengthening the cash conversion cycle.

Internal Control Systems and Operating Performance: Evidence from Small and Medium Enterprises (SMEs) in Ondo State

This study examined the internal control systems and operating performance of SMEs in Ondo State. Specifically, the study analyzed the impact of internal control system components on the profitability of SMEs in Nigeria and a total of 120 SMEs were sampled for the study. Data used in the study were collected with a questionnaire. Collected and collated data were analyzed using logistic regression estimation. The result showed that the probability that an SMEs will have high level of operating performance in terms of higher actual annual profit increases insignificantly by 0.78% and 1.95% respectively, when there is a unit measure of improvement in the control environment and control activities and that the probability declines insignificantly by 0.051%, 0.33% and 4.53% respectively, with a unit measure of improvement in risk assessment, information and communication and monitoring activities. The study established that the components of internal control system has no significant impact on the operating performance of SMEs in Ondo State, though the control environment and control activities have a positive impact on the probability of an enterprise recording a high operating performance. Hence, SMEs should maintain and leverage the positive impact of the control environment and control activities to boost their operating performance, However, issues surrounding risk assessment, information and communication as well as monitoring activities should be addressed systematically based on the reality of the operational structure of each enterprise.

ISO 14001 and 26001, Agents of Change in the SME

At present, business strategies in SMEs (Small and medium enterprises) are crucial for consolidation in highly competitive markets, in achieving a better image and in business profitability. One of the strategies that are currently being used and that have a high level of success are the practices focused on sustainability and social responsibility, through standardized standards such as: ISO 14001 and ISO 26001. The literature related to sustainable business is based mainly on the theory of resources and capabilities, and in theory based on Stakeholders. These currents state that companies should focus on profitable strategies to ensure significant and long-term results, in order to achieve organizational and financial results for stakeholders. In this work, the sample consists of 215 companies from the commerce, services and industry sectors, located in the southern region of the State of Sonora in Mexico.The objective of the work is to analyze the influence of ISO 14001 and 26001 standards on the image and profitability of SMEs. The statistical analysis of the data has been carried out through the linear regression technique by OLS (Ordinary Least Squares). The findings prove that the ISO 14001 standard is the one that most influences the improvement of the business image and the level of profitability of the SME. In addition, we discovered that ISO 26001 has a partial influence on the image and profitability of the SME.

Strategi Talent Management Pada Usaha Kecil Dan Menengah Dalam Meningkatkan Daya Saing Bisnis

Dynamic business conditions, uncertainty and complexity require Small and Medium Enterprises (SMEs) to improve their strategy to exist in the business world. One of the important factors in business competition is the qualified Human Resources (HR). The good Management of human resource talent will be an added value for business competition. This study aims to analyze talent management strategies in SMEs to improve business competitiveness. The research methodology used a qualitative approach using case study. Data obtained through interviews and field observations on 5 key informants in SMEs belonging to members of PAUB (Women Interfaith) in Malang. The results of the study found that the SME management talent strategy consists of talent planning, talent recruitment, Talent Development and Talent Retaining. Talent Management strategy development should pay attention to corporate strategy and external environment that affect the condition of SMEs. Talent Management Strategy if applied properly is expected to improve SME productivity and profitability so that will lead to SME business continuity.

Management of working capital - the Achilles heel of small and medium enterprises: the case of Greece

The main purpose of this paper is an empirical investigation of the relationship between working capital management and firms' performance in Small and Medium Enterprises (SMEs) in Greece during the crisis period. We used a data set of 459 SMEs split-up over eight sectors of economic activities according to the European NACE classification scheme. The research covers the period of 2008-2012, which gives the five-year period of observation of financial results of selected companies. The efficiency of working capital management was measured by accounts receivables turnover, inventories turnover, accounts payables turnover and cash conversion cycle. Return on assets was used as the profitability variable. The study is based on correlation and regression analysis to analyse data. The results indicate that all working capital components significantly affect Greek SMEs profitability. The paper is organised as follows: in the next section we briefly present the problem based on literature review. This is followed by the presentation of research methodology and the data sources used in the analysis. The results are presented and discussed in Section 3. Last section summarises the conclusions and presents further opportunities for research.

Management of working capital - the Achilles heel of small and medium enterprises: the case of Greece

The main purpose of this paper is an empirical investigation of the relationship between working capital management and firms' performance in Small and Medium Enterprises (SMEs) in Greece during the crisis period. We used a data set of 459 SMEs split-up over eight sectors of economic activities according to the European NACE classification scheme. The research covers the period of 2008-2012, which gives the five-year period of observation of financial results of selected companies. The efficiency of working capital management was measured by accounts receivables turnover, inventories turnover, accounts payables turnover and cash conversion cycle. Return on assets was used as the profitability variable. The study is based on correlation and regression analysis to analyse data. The results indicate that all working capital components significantly affect Greek SMEs profitability. The paper is organised as follows: in the next section we briefly present the problem based on literature review. This is followed by the presentation of research methodology and the data sources used in the analysis. The results are presented and discussed in Section 3. Last section summarises the conclusions and presents further opportunities for research.

The impact of macroeconomic variables on SMEs in Malaysia

Small and Medium Enterprises (SMEs) in Malaysia have gained a prominent role as the significant contributor to the economic growth. However, the world nowadays is heading towards economic downturn. The stability of macroeconomic variables promotes profitability of SMEs which propels them to a stage where they can access financing for sustaining growth. Therefore, it is apparent that the behaviour of the macroeconomic variables plays a major part in determining the nation’s backbone in surviving the economic downturn. The objective of this study is to evaluate the impact of macroeconomic variables on the profitability of SMEs in Malaysia using multiple regression analysis. The findings revealed that the exchange rate has a small positive impact on SME GDP growth rate (10.81%), the interest rate has a strong positive impact (60.74%), while the inflation rate has a strong negative impact (-53.89%). Therefore, it can be concluded that the interest rate and inflation rate have significant impacts on the profitability of SMEs in Malaysia.

English

Dwindling oil revenue, high youth unemployment, very high foreign exchange rates and recession are the challenges that Nigeria is currently faced with. There is therefore the urgent need for diversification and resuscitation of the economy. Small and medium enterprises (SMEs) are thus an important tool to achieve this. How therefore can acquisition of entrepreneurship education skills; adoption and use of technology; and globalisation through improved cross-border transactions enhance performance of SMEs, bring about economic recovery, and thus help to ameliorate the economic challenges. Cross-sectional survey research design was adopted for the study. The instrument consisted of forty items on a five-point Likert rating scale, which was administered on four hundred owners/managers of manufacturing SMEs sampled using cluster, proportionate and random sampling procedures from six selected states across all the geo-political zones of Nigeria. Mean and standard deviation were used to answer three research questions. Linear regression was used to test the three null hypotheses at 0.05 level of significance. The results indicated that acquisition of entrepreneurship education skills; adoption and use of technology devices and platforms, as well as, globalisation enhance productivity and profitability of SMEs in Nigeria. It is concluded that for manufacturing SMEs to operate competitively, profitably and significantly contribute to the economic recovery and growth of Nigeria, they need to continuously acquire newer entrepreneurial skills; adopt and use innovative modern technologies; and have an internationalized profile. Key words: Entrepreneurial skills, adoption and use of technology, cross-border transactions, SMEs, competitive advantage, superior performance, Nigeria.

The Impacts of Interest Rate Fluctuations on the Growth of Small and Medium Enterprises (SMEs) In Accra

The establishment and the sustenance of SMEs in Ghana is a perennial problem. The owners and managers of the sector believe that they face difficulty in operating in the period of slow economic growth. Despite a whole range of measures introduced over the years from 1993 to date in order to control the interest rate fluctuations by governments for accelerated growth, the country had rather recorded the opposite. This paper investigates the impacts of interest rate fluctuations on the growth of Small and Medium Enterprises in Accra. Lack of government’s vision for SMEs sector, limited access to finance, trade liberalization, high collateral demand by banks are some of the challenges facing SMEs. The data used was a balanced data of six SMEs randomly selected. The primary and secondary data were analysed using SPSS and Microfit software respectively, and ARDL technique was also employed, with the application of tables in percentage. The study began with a unit root test. The ARDL technique of co-integration and F-Statistic compared to the critical values indicating a co-integration relationship between EBIT and interest rate and other variables. The results indicate that there is interdependence between the SMEs profitability and interest rate, bank loans and the size of business. The paper recommends the re-introduction of minimum credit allocation by banks, clear-cut policy for the sector and many more.

Impact of Financial Management Practices on SMEs Profitability with Moderating Role of Agency Cost

The importance of Small and medium enterprises (SMEs) towards economic development and growth is considerable. Some SMEs are facing difficulties to their development due to the lack of financial resources and management experience. The objective of this study is to check the relationships of financial management practices on profitability of small and medium enterprises and also to check the impact of agency cost on this relationship. This study consists of data analysis of two hundred SMEs from Faisalabad Pakistan. The study used primary data predominantly. SPSS 23 is used for descriptive analysis and Structural Equation Model (SEM) through Partial Least Square (PLS) 3 for hypothesis testing. The findings of this study indicate the presence of positive relationship between financial management practices and SMEs profitability but agency cost as a moderator has no effect on this relationship. The study strongly recommends higher adherence to financial management practices. Policy makers, developments partners, owners, and managers of SMEs may use these findings for sustainability of their business in Pakistan.

The impact of technological innovation on SME's profitability in Nigeria

There is no doubt that new or improved product or process of production continues to create firm's competitive advantage over others in the market. This study examined the impact of research and development (R&D) expenditure, product and process innovations on small and medium enterprises (SMEs) performance in the manufacturing industry in Nigeria using a survey of 1,000 SMEs with a response rate of 52.1% in year 2009. The results with least squares method showed that R&D spending by the firms as well as product and process innovation has significant impacts on the firm's performance with the probability value of 0.0529, 0.0624 and 0.0086 respectively at 10% level of significant. Also, training of workforce constitutes the major innovation activities in the Nigerian manufacturing SMEs as against in-house and outsourced R&D activities. This study suggests improvement in R&D spending and other technological activities which are expected to increase SMEs' profitability and thus generate more employment in the country.

The impact of technological innovation on SME's profitability in Nigeria

There is no doubt that new or improved product or process of production continues to create firm's competitive advantage over others in the market. This study examined the impact of research and development (R&D) expenditure, product and process innovations on small and medium enterprises (SMEs) performance in the manufacturing industry in Nigeria using a survey of 1,000 SMEs with a response rate of 52.1% in year 2009. The results with least squares method showed that R&D spending by the firms as well as product and process innovation has significant impacts on the firm's performance with the probability value of 0.0529, 0.0624 and 0.0086 respectively at 10% level of significant. Also, training of workforce constitutes the major innovation activities in the Nigerian manufacturing SMEs as against in-house and outsourced R&D activities. This study suggests improvement in R&D spending and other technological activities which are expected to increase SMEs' profitability and thus generate more employment in the country.