Documents

Determining the Extent of Financial Planning and Performance of Small Scale Enterprises (SSEs) in Kisii Town, Kenya (Repaired)

Description
Small Scale Enterprises (SSEs) are very important in the business environment of any country in terms of employment creation, poverty reduction and contribution to economic growth. In Kenya, they employ over 80% of the unemployed population which is largely women and the youth and contribute up to 18.4 % of the country’s Gross Domestic Product (GDP). Despite their importance, they are faced with the threat of failure with past statistics indicating that 60% fail within the first few months of operation. Proper financial planning is vital in any business enterprise. The extent to which financial planning determines performance of SMEs has not been clearly understood. This study aimed at determining the extent to which financial planning affects the performance of small scale enterprises in Kisii town. The study used a descriptive survey research design where the respondents were selected through stratified and purposive random sampling techniques. A sample size of 93 out of 1224 target population, respondents was used. Data was collected by use of a questionnaire, edited, summarized and coded for ease of classification and analyzed using computer software. Descriptive statistics especially, frequencies and percentages were applied to make it easier for the researcher to understand and interpret implications of the findings. Presentation and reporting was in form of frequency tables, pie charts and bar graphs. A Pearson’s correlation coefficient was used to establish the relationship between financial planning and financial performance. It was revealed that there is a strong positive relationship between Financial planning and business Performance at Pearson correlation coefficient r=0.894. It was recommended that the Central government through the Ministry of Trade Commerce and Industry in collaboration with the County government of Kisii provide training programs, through seminars and workshops, in financial planning for Small Scale Enterprises to improve the extent of use of financial planning in their businesses.
Categories
Published
of 12
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
Related Documents
Share
Transcript
  International Journal of Finance, Accounting and Economics (IJFAE) ISSN: 2617-135X Vol. 1 (3) 18-29 , October, 2018 www.oircjournals.org   18 | Page  Nyamache and Moturi 2018) www.oircjournals.org  Determining the extent of Financial Planning and Performance of Small Scale Enterprises (SSEs) in Kisii Town, Kenya 1 Tom Mokweri Nyamache 2 Moses Arisa Moturi School of Business and Economics Turkana University College 2 School of Business and Economics Mount Kenya University Type of the Paper: Research Paper.  Type of Review: Peer Reviewed. Indexed in:  worldwide web. Google Scholar Citation:  IJFAE   International Journal of Finance, Accounting and Economics (IJFAE) A Refereed International Journal of OIRC JOURNALS.   © Oirc Journals. This work is licensed under a Creative Commons Attribution-Non Commercial 4.0 International License subject to proper citation to the publication source of the work. Disclaimer: The scholarly papers as reviewed and published by the OIRC JOURNALS, are the views and opinions of their respective authors and are not the views or opinions of the OIRC JOURNALS. The OIRC JOURNALS disclaims of any harm or loss caused due to the published content to any party. How to Cite this Paper:   Nyamache, M. T., and Moturi M. A., (2018). Determining the extent of Financial Planning and Performance of Small Scale Enterprises (SSEs) in Kisii Town, Kenya.   International Journal of Finance, Accounting and Economics (IJFAE) 1 (3), 18-29.  International Journal of Finance, Accounting and Economics (IJFAE) ISSN: 2617-135X Vol. 1 (3) 18-29 , October, 2018 www.oircjournals.org   19 | Page  Nyamache and Moturi 2018) www.oircjournals.org  Determining the extent of Financial Planning and Performance of Small Scale Enterprises (SSEs) in Kisii Town, Kenya 1 Tom Mokweri Nyamache 2 Moses Arisa Moturi School of Business and Economics Turkana University College 2 School of Business and Economics Mount Kenya University Abstract Small Scale Enterprises (SSEs) are very important in the business environment of any country in terms of employment creation, poverty reduction and contribution to economic growth. In Kenya, they employ over 80% of the unemployed population which is largely women and the youth and contribute up to 18.4 % of the country’s Gross Domestic Product (GDP). Despite their importance, they are faced with the threat of failure with  past statistics indicating that 60% fail within the first few months of operation. Proper financial planning is vital in any business enterprise. The extent to which financial  planning determines performance of SMEs has not been clearly understood. This study aimed at determining the extent to which financial planning affects the performance of small scale enterprises in Kisii town. The study used a descriptive survey research design where the respondents were selected through stratified and purposive random  sampling techniques. A sample size of 93 out of 1224 target population, respondents was used. Data was collected by use of a questionnaire, edited, summarized and coded for ease of classification and analyzed using computer  software. Descriptive statistics especially, frequencies and percentages were applied to make it easier for the researcher to understand and interpret implications of the findings. Presentation and reporting was in form of  frequency tables, pie charts and bar graphs. A  Pearson’s correlation coefficient was used to establish the relationship between financial planning and financial performance. It was revealed that there is a strong positive relationship between Financial planning and business Performance at Pearson correlation coefficient r=0.894. It was recommended that the Central government through the Ministry of Trade Commerce and Industry in collaboration with the County government of Kisii provide training programs, through seminars and workshops, in  financial planning for Small Scale Enterprises to improve the extent of use of financial planning in their businesses. Introduction Financial planning (FP) is a process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve monetary goals (smith, 2010). Financial Panning (FP) is one of the several functional areas of management that is crucial to the success of any small scale enterprise (SSE). Businesses typically prepare a wide array of plans and budgets. Some of which include sales plan, production plan, cost plan and expense  budget and budgeted income statement and balance sheet. These budgets are very important to anticipate the future in advance. This will in turn help to minimize risks and because of the trade-off between risk and return, profitability increases. Therefore,  preparing detailed financial plan or budgets will have a positive effect on profitability of the firm (Horngreen, Datar & Foster, 2006). Small businesses must therefore do financial planning in order for their  business operations to achieve the desired goals. ARTICLE INFO Received on 8 th  July, 2018 Received in Revised Form 10 th  September, 2018 Accepted 18 th September, 2018 Published online 21 st  September, 2018 Keywords :   Financial, Performance, Measurement, Planning, Jua Kali, Small Scale Enterprise     International Journal of Finance, Accounting and Economics (IJFAE) ISSN: 2617-135X Vol. 1 (3) 18-29 , October, 2018 www.oircjournals.org   20 | Page  Nyamache and Moturi 2018) www.oircjournals.org  Statement of the Problem Lack of proper financial planning has been touted as the major setback in the performance, growth and development of the SSEs. This is despite assertions that proper financial planning does enhance  performance and competitiveness of the SSEs. It is upon this background that this study embarked on investigating the extent of financial planning on  performance of SSEs in Kisii town. Study Objective The following was the objectives of the study: i.   To determine the extent to which financial  planning is practiced by small scale enterprises in Kisii town. Research Question  This study will sought to answer the following question: i.   To what extent is financial planning being  practiced by small scale enterprises in Kisii town? Scope of the Study The study was carried out among SSEs in Kisii town, Kisii County, Kenya. It was conducted between March and April 2016. Significance of the Study  i.   This study is meant to enlighten those entrepreneurs on Financial Planning. ii.   The study also is of use to policy makers in the Ministries of Trade, Commerce and Industry in formulating policies and re-adjusting the existing ones on FP of business institutions. iii.   The findings of the study is of great significance to the business owners, the government, management consultants, academicians and researchers.  Limitations of the Study. This study focused on FP of SSEs within Kisii town. The major limitation was on accessing information from the various enterprise owners and or managers. Some respondents were reluctant to provide data regarding their business performance. They would have not been honest and therefore would have withheld some vital data. However, this was minimized through the assurance of confidentiality and anonymity of the data provided by them. Literature Review According to Groppeli & Nikbakht (2002), financial  planning (FP) is the process in which one calculates how much financing is necessary to give continuity to the operations of an organization, how one decides how much and how the necessary funds will be financed. One can suppose that without a reliable  procedure to estimate the necessary resources, an organization may not have enough resources to honour its assumed commitments, such as obligations and operational consumptions. According to Campsey (2010), financial performance is the understanding of numbers that comprise your  business and then recognizing what is happening and knowing how to influence the results that are being achieved. Once numbers are understood business managers begin to identify areas to improve efficiency whilst building effectiveness and client value. Financial performance greatly depends and is determined by liquidity, efficiency, profitability, capital structure and low business risks. This is  beneficial in a way that, the stronger the FM the greater the opportunity to maximize profits in the short term and to grow capital value in the long term. The stronger the FM the easier it is to raise finance, and probably at a lower cost. Obviously banks prefer to work with business owners who can control their finances well (World Bank Report, 2012). According to the European Commission (2008), it is recognized that appropriate accounting information is important for a successful management of any  business entity, whether small or large. It is crucial therefore that the accounting practices of SSEs supply complete and relevant financial information needed to improve economic decisions made by entrepreneurs. The success of enterprises is judged by their financial performance, hence the choice to study if SSEs measure financial performance. According to International Monetary Fund (IMF, 2012), the level of WC is decided by management in accordance with its policy of profit planning and control. Adequate profit assists in the generation of cash. It makes it possible for management to plough  back a part of earnings into the business and substantially build up internal financial resources (IMF, 2012). Funds of creditors and owners are invested in various assets to generate sales and profit.  International Journal of Finance, Accounting and Economics (IJFAE) ISSN: 2617-135X Vol. 1 (3) 18-29 , October, 2018 www.oircjournals.org   21 | Page  Nyamache and Moturi 2018) www.oircjournals.org  The better management of assets, the larger the amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes the assets. A proper balance between sales and assets generally reflects that assets are managed well; several activity ratios can be calculated to judge the collectiveness of assets utilization, (Pandey, 2001). According to Hull (2011), the choice of performance measures is one of the most critical challenges facing  business organizations. In fact, performance measurement systems play a key role in developing strategic plans, evaluating the achievement of firms’ objectives and rewarding managers. Theoretical Framework Financial economics is the branch of  economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of  real economic variables on financial ones, in contrast to pure finance. It centres on managing risk in the context of the financial markets, and the resultant economic and financial models. It essentially explores how rational investors would apply risk and return to the problem of an investment  policy. Here, the twin assumptions of  rationality and market efficiency lead to modern  portfolio theory, the Capital asset pricing model (CAPM), and to the Black   –  Scholes theory for  option valuation; it further studies phenomena and models where these assumptions do not hold, or are extended. Financial economics , at least formally, also considers investment under certainty  (Fisher separation theorem,  theory of investment value , Modigliani-Miller theorem) and hence also contributes to corporate finance theory. Financial econometrics is the branch of financial economics that uses econometric techniques to parameterize the relationships suggested. Although closely related, the disciplines of economics and finance are distinctive. The economy” is a social institution that organizes a society’s production, distribution, a nd consumption of goods and services,” all of which must be financed. Economists make a number of abstract assumptions for purposes of their analyses and predictions. They generally regard financial markets that function for the financial system as an efficient mechanism (Efficient-market hypothesis). Instead, financial markets are subject to human error and emotion. New research discloses the mischaracterization of investment safety and measures of financial products and markets so complex that their effects, especially under conditions of uncertainty, are impossible to  predict. The study of finance is subsumed under economics as financial economics, but the scope, speed, power relations and practices of the financial system can uplift or cripple whole economies and the well-being of households, businesses and governing  bodies within them  —  sometimes in a single day. Financial Mathematics Theory Financial mathematics is a field of  applied mathematics, concerned with financial markets. The subject has a close relationship with the discipline of financial economics, which is concerned with much of the underlying theory that is involved in financial mathematics. Generally, mathematical finance will derive, and extend, the mathematical or  numerical models suggested by financial economics. In terms of practice, mathematical finance also overlaps heavily with the field of computational finance (also known as financial engineering). Arguably, these are largely synonymous, although the latter focuses on application, while the former focuses on modeling and derivation. The field is largely focused on the modelling of  derivatives, although other important subfields include insurance mathematics and quantitative portfolio problems.  Experimental Finance Theory  Experimental finance aims to establish different market settings and environments to observe experimentally and provide a lens through which science can analyze agents' behavior and the resulting characteristics of trading flows, information diffusion and aggregation, price setting mechanisms, and returns processes. Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions and therefore prove them, and attempt to discover new  principles on which such theory can be extended and  be applied to future financial decisions. Research may proceed by conducting trading simulations or by establishing and studying the behavior, and the way that these people act or react, of people in artificial competitive market-like settings.

On Deterrence

Nov 9, 2018
Search
Similar documents
View more...
Tags
Related Search
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks
SAVE OUR EARTH

We need your sign to support Project to invent "SMART AND CONTROLLABLE REFLECTIVE BALLOONS" to cover the Sun and Save Our Earth.

More details...

Sign Now!

We are very appreciated for your Prompt Action!

x