FINANCIAL MANAGEMENT PRACTICES AND PROFITABILITY OF SMALL AND MEDIUM-SCALE ENTITIES IN THE TAMALE METROPOLITAN AREA
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Date
AUGUST, 2015
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Abstract
Small and Medium-sized Entities (SMEs) are very important to the economic growth and development of a nation. Unfortunately, a large number of SMEs in Ghana do not survive for a long period. This study believes that Prudent Financial Management Practices can help SMEs become profitable and for that matter stay in business for a long period of time. This study assessed the impact of financial management practices on the profitability of SMEs in the Tamale Metropolitan area of Ghana with a view to establishing a coherent model directed at improving profitability of SMEs in Ghana. The study used a sample of two hundred and thirty-two (232) SMEs operating in Tamale. The study was a cross sectional survey which used primary data predominantly. Multiplicative linear regressions together with Pearson‟s correlation co-efficient were used to analyse the data. The findings indicate that financial management practices such as working capital management, Financing, Investing, Financial reporting and Accounting Information Systems (AIS) impact positively on the profitability of SMEs, accounting for 77.4% of the variances in profitability of SMEs. The results further indicate that the application of Accounting Information Systems has the highest effect on profitability since a one percent (1%) increase in the application of Accounting Information Systems increases profitability by 0.39%. The study strongly recommends higher adherence to financial management practices. Policy makers, developments partners, owners, and managers of SMEs may use these findings to appreciate the importance of financial management practices to the sustainability of SMEs in Ghana.
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A Thesis submitted to the Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Master of Business Administration (Accounting Option)