Presentación de Encuestas del Personal Operativo

No. 1: SMEs do not employ capital budgeting techniques in evaluating investment alternatives

In testing this hypothesis the researcher used the questions on capital budgeting practices and capital budgeting techniques. The analysis yielded results as depicted in Table 5.32 and Table 5.33.

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Table 5.32 Capital Budgeting Practices

Frequency Percent Valid Percent

Cumulative Percent Valid Making financial budgets 28 19.3 19.3 19.3

Evaluation of alternative projects

22 15.2 15.2 34.5

Possible income projections 15 10.3 10.3 44.8 Making financial budgets

plus evaluation

21 14.5 14.5 59.3

Doing all three 33 22.8 22.8 82.1

Preparing financial budgets plus income projection

14 9.7 9.7 91.7

Evaluation plus income projection

12 8.3 8.3 100.0

Total 145 100.0 100.0

Source: Data Analysis

Table 5.33 Capital Budgeting Techniques

Frequency Percent Valid Percent

Cumulative Percent Valid Payback 87 60.0 69.0 69.0 Discounted payback 18 12.4 14.3 83.3 NPV 21 14.5 16.7 100.0 Total 126 86.9 100.0 Missing System 19 13.1 Total 145 100.0

Source: Data Analysis

In Table 5.30 it is shown that 100% of the SMEs being studied employ at least one of the capital budgeting practices given in the question. From the responses, 55.2% of these SMEs indicated to be using at least a combination of two strategies whilst almost 23% make use of all three strategies. The Table 5.31 depicts results on the capital budgeting techniques that SMEs make use of. Net Present Value is made use of by a valid 69% with 19 cases having with missing answers. In the light of

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these results SMEs seem to be aware of capital budgeting but probably lack the effective implementation of its techniques. However, a Chi-square test was carried to compare the results in the two categories above and the chi-square test results are tabulated in Table 5.34.

Table 5.34 Chi-Square on Capital Budgeting

Value df Asymp. Sig. (2- sided) Pearson Chi-Square 22.088a 30 .851 Likelihood Ratio 25.852 30 .683 Linear-by-Linear Association .361 1 .548 N of Valid Cases 145

a. 32 cells (76.2%) have expected count less than 5. The minimum expected count is .74.

Source: Data Analysis

The chi-square values are way above 0.05 meaning that there is little statistical evidence to reject the null hypothesis. Therefore, the null hypothesis that the SMEs are not employing capital budgeting techniques in evaluating investment alternatives is accepted and a conclusion can be made that SMEs do not employ sound capital budgeting techniques in evaluating investment alternatives. Consistently, Ekanem (2005) postulated that SMEs do not employ sound investment appraisal techniques because they lack the resources, skill and knowledge to do so.

No. 2: SMEs do not properly manage their everyday financial activities (working capital management)

In testing this hypothesis the researcher made use of the mean score on variables that answer the question on the regularity of review of everyday financial activities. The mean scores are tabulated below in Table 5.35.

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Table 5.34 Chi-Square on Capital Budgeting

review of cash account review of debtors/receivabl es review of inventory review of payables Mean 5.77 5.31 5.99 4.57 N 145 145 145 145 Std. Deviation .799 1.278 .786 1.284

Source: Data Analysis

The table above depicts that most SMEs do review their cash accounts, receivables, inventories and payables regularly as evidenced by the means that are generally above the score 5 out of a maximum score of 7. The summarised mean of these variables becomes 5.41 which is a high score resembling the regular review of the working capital elements. The high score means are evidence enough to reject the null hypothesis and conclude that SMEs do properly manage their everyday financial activities. Studies by Kehinde (2011) and Nguyen and Ramachandran (2006) had similar conclusions. Kehinde (2011) postulates that SMEs are very much concerned about their cash balances and they can do whatever possible to have huge balances in their accounts. However, Kehinde (2011) disregarded the fact that SMEs end up employing an improper credit policy forgetting to pay their debts.

No. 3: SMEs do not employ proper financial reporting systems (accounting practice)

The ANOVA test was implemented to properly analyse the way that SMEs handle the financial reporting and analysis function. The variables used and the results obtained are depicted in Table 5.36 and Table 5.37.

Table 5.36 Financial Reporting and Analysis

business's regard for financial reporting

how often do you prepare financial statements how often financial statements analysed financial statements prepared N Valid 145 145 145 145 Missing 0 0 0 0 Mean 4.71 1.56 1.74 4.50 Std. Deviation 1.236 .676 .780 .647

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Table 5.37 ANOVA on Financial Reporting and Analysis

Source: Data Analysis

In the ANOVA table 5.37 most F-values are greater that the expected F-critical value meaning that the evidence is significantly inconsistent with the null hypothesis. The analysis of the mean scores also reflects on much evidence to reject the null hypothesis. It is therefore statistically significant to reject the null hypothesis and conclude that SMEs do employ proper financial reporting and analysis practices. Agyei-Mensah (2011) obtained different results which state that SME owners lack accounting information and know-how to soundly report their financial status and progress. This therefore acts as a barrier to the implementation of sound financial systems. The results in this study are inconsistent with Agyei-Mensah conclusions because there are now available many support programmes available that are teaching SMEs to soundly report and manage their finances.

No. 4: Employing sound financial management practices does not significantly affect the firm’s growth/success

Sum of Squares df Mean Square F Sig. how often do you prepare financial statements

Between Groups (Combined) .047 2 .024 .051 .950

Linear Term Weighted .010 1 .010 .022 .883

Deviation .037 1 .037 .081 .777 Within Groups 65.704 142 .463 Total 65.752 144 how often financial statements analysed

Between Groups (Combined) .690 2 .345 .564 .570

Linear Term Weighted .115 1 .115 .187 .666

Deviation .575 1 .575 .940 .334 Within Groups 86.869 142 .612 Total 87.559 144 business's regard for financial reporting

Between Groups (Combined) .670 2 .335 .217 .805

Linear Term Weighted .076 1 .076 .049 .824

Deviation .593 1 .593 .384 .536

Within Groups 219.165 142 1.543

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The researcher employed the linear regression analysis to test the relationship that might exist between the employment of financial management practices and firm performance. Firm performance was the dependent variable whilst financial management practices (capital budgeting, working capital management, capital structure decisions and accounting practice) were the independent variables.

Table 5.38 Regression Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate 1 .275a .076 .045 1.228

a. Predictors: (Constant), working capital management, capital budgeting techniques, financial reporting and analysis, capital structure decisions b. Dependent Variable: firm performance

Source: Data Analysis

Table 5.39 Regression ANOVA

Model Sum of Squares df Mean Square F Sig.

1 Regression 14.924 4 3.731 2.473 .048a

Residual 182.544 121 1.509

Total 197.468 125

Source: Data Analysis

From the regression ANOVA table above the p-value is 0.048 and this is significant. This means there is significant enough statistical evidence to reject the null hypothesis and conclude that the employment of sound financial management practices significantly affect firm performance. The correlation coefficient for each predictor variable was also found to be positive meaning that the employment of sound financial management practices significantly and positively affects firm performance. Similarly, Agyei-Mensah (2011), Harif and Osman (2007) and Ekanem (2005) concluded that the more SMEs adopt effective ways of managing their finance function, the high the probability of success.

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5.4 CHAPTER SUMMARY

This chapter mainly focused on the question by question analysis of responses and relating each finding to the existing literature. Hypothesis testing was done using the chi-square test, mean scores, ANOVA and simple-linear regression. It was concluded that there is evidence that SMEs do make use of sound financial management practices. It was also concluded that there is a significant and positive relationship between the employment of sound financial management practices and firm performance.

The following chapter (Chapter 6) gives conclusions and recommendations based on the findings of this study.

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CHAPTER SIX

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6.1 INTRODUCTION

This chapter focuses on providing a conclusive review of the whole study. The first sections give a brief recap of the research objectives, the literature relevant to the obtained results and also the research design. The chapter gives a summarised discussion on the obtained research results from the general study and the research hypotheses. Conclusions are then made on these findings. Recommendations for SMEs, government and other policy makers are given in this chapter with reference to the research findings. The chapter ends by suggesting areas of further research. Section 6.2 gives an overview of the literature relevant to the main findings of the study.