Mpacts of financial management practices on financial profitability of small and medium scale enterprises (smes) in jimma town

Abstract

he objective of this study is to examine the impact of financial management practices on financial profitability of small and Medium Scale Enterprises (SMEs) located in Jimma Town. Based on the descriptive and explanatory research design, the study applied quantitative approaches. This study adopted a descriptive research design in which a census of 416 targeted population of 4 sector were drawn from a list of SMEs in Jimma town, where by a proportionate random sample of 204 employees were taken from 4 sector of Small and Medium Scale Enterprises (SMEs) in Jimma Town. Questionnaires were administered as the main tool of data collection whereby 187 questionnaires were collected representing a 91.67% response rate. Primary data was collected through questionnaire sources. Inferential statistical techniques such as Pearson Correlation analysis and regression analysis were employed to test the hypotheses of association and differences. Collected data were processed using the Statistical Package for Social Science (SPSS) which was the main computer software that was utilized in data analysis. The investing practices had coefficients of estimate which were significant implying that the null hypothesis was rejected. The Capital structure practices null hypotheses were rejected implying significant impacts on financial profitability. Cash management practices were significant hence the null hypothesis was rejected. It is therefore recommended that it is important for the organizations to retain their profits so that they can reinvest and gain higher returns on investments and owners’ equity. Furthermore, organizations need to utilize computers in cash management since they are efficient and effective. This study suggests the need for further research on other economic factors besides financial management practices that impacts the financial profitability of SMEs and other organizations