Financial Analysis Tools for SMEs

Financial Analysis Tools for SMEs CHAPTER FIVE DISCUSSIONS, RECOMMENDATIONS AND CONCLUSIONS INTRODUCTION The SME sector development is seen as a key strategy for economic growth, job generation and poverty reduction (Agupusi, 2007:2). This study endeavored to explore and describe the financial performance measures currently used by manufacturing SMEs in Mauritius. It was undertaken due to the fact that many studies were conducted on obstacles faced by SMEs in obtaining finance, but it appeared that not enough were undertaken on how these SMEs manage their finances; whereas some studies found that small businesses fail because more often than not cash flow is not properly managed (Mbonyane, 2006:18). In this context the Z-score model is presented as a useful bankruptcy model for SME. This chapter concludes the research project by summarizing the previous chapters and highlighting the results of the empirical study in Chapter Four with respect to the objectives of the research. It also includes comments on the contribution and limitation of the study as well as recommendations and suggestions for future research. SUMMARY AND OVERVIEW OF THE RESEARCH Chapter One presented the background of the study, followed by problem statement, rationale and objectives of the research, a preliminary literature review, research methodology and layout of the Chapters. Chapter Two presented a literature review regarding SMEs and their role in the Mauritian Economy. It was shown that the development of a sound SME sector is a key factor in job creation and economic growth for Mauritius. Many obstacles were pointed out as causes of SME failure, including financial performance skills, which were the focus of this study. Moreover, an international comparative analysis was presented. A brief discussion of non-financial measures was given as well, followed by financial performance measures that included financial ratios and bankruptcy prediction models. Chapter Three presented the research plan including sampling, data collection, and data analysis. Chapter Four presented the results of the empirical research findings on financial performance measures currently used by manufacturing SMEs in Mauritius. Thematic content analysis was used in presenting the results, taking the themes in the literature of the topic as basis for comparison. Chapter Five is the final phase of the study and aims at using the information from the literature study and the empirical findings to provide solutions to manufacturing SMEs’ financial performance measurement according to the findings and through recommendations. DISCUSSIONS OF FINDINGS FINANCIAL PERFORMANCE MEASUREMENT The first objective of the study was to identify financial tools currently used by manufacturing SME’s in measuring their financial performance. This objective of the study was achieved during the field study with semi-structured interviews at SME premises that helped gather information on the financial performance measures used by each. The findings revealed the following ratios as the most widely used by respondents: Cash flow to total debt (used by six respondents); Current ratio (used by six respondents); Working capital to total assets (used by five respondents); Cash flow to average total current liabilities (used by five respondents); Gross profit margin ratio (used by four respondents); and Inventory turnover (used by four participants). Gross Profit Ratio The level of satisfaction was measured using a likert scale. The conversion of the 5- point Likert- type scale for the satisfaction with current financial performance scale to illustrate the total score was as follows: (not satisfied at all = 1 (1), not satisfied = 2 (2), somewhat satisfied = 3 (3), satisfied = 4 (4), very satisfied = 5 (5)). The higher the mean score indicates a higher level of satisfaction. Upon computing the mean for this scale,, it was found that the mean was 2.4000, this implies that there is a relative low level of satisfaction prevails with the owners of the SMEs concerning their current financial performance. It can be seen that all of the participants felt that measuring financial performance is important. However, despite the fact that measuring financial performance is important, none of the SMEs used a finance officer or an external consultant to evaluate their financial performance. It can be observed that financial ratios (100%) is the only used tool by the SMEs sampled as compared to tools such as Scoreboards (0%), the Bankruptcy Prediction Model (0%) and other models(0%). Based on the results of the analysis, it was found that even though the owners of the SME used financial ratios, only 39 percent of them found the ratios to be useful in helping to improve their financial performance. BANKRUPTCY PREDICTION MODEL The use of bankruptcy prediction models (another financial tool in the literature) was totally absent among the respondents. In fact, almost all the participant SMEs knew nothing or very little about bankruptcy prediction models. The limited use of ratios and non use of bankruptcy prediction models raises the issue of objective number two which is to recommend necessary improvements on financial performance measurement of SMEs which will be part of the recommendations. Also, the lack of knowledge of bankruptcy prediction models by interviewees at different SMEs may necessitate relevant training for the financial officers of SMEs; that is the issue of objective number three of the study, which will be part of the recommendations section as well. The last objective of the study was to recommend necessary improvements on financial performance measures used by manufacturing SMEs. The study found that most manufacturing SMEs used financial ratios to measure their financial performance, but to a very limited extent. Very few ratios were used by individual SMEs and most of the ratios used were not the best indicators mentioned in the literature. Though, some of the interviewees acknowledged that they need to use more ratios. This objective will be part of the recommendation section below. Another objective of the study was to recommend necessary training interventions that would be needed for manufacturing SMEs’ successful financial performance measurement. The research findings indicated that none of the respondents used any of the available bankruptcy prediction models; whereas it was proven in the literature that the models could be used successfully by SMEs as well as big businesses. SMEs could use the models not necessarily for predicting failure, but as a tool to constantly assess how they are doing financially so as to take necessary measures anytime they feel threatened. It was found that most of the respondents knew nothing or very little about the models, and it seemed quite obvious that relevant training is needed. LIMITATIONS OF THE STUDY These results can only be seen as a trend and further studies need to be conducted for any attempt at generalization. For this study for example, either emails were not responded to at all, or potential participants kept postponing, suggesting that the researcher call the following week. In the end, respondents had to be approached at their business premises and requested to participate. It is costly if it is taken into account that many SMEs would decline to participate, but works better as procedure; and should be considered in future studies. Also, it was noticed that more small businesses (70%) participated in the study because most medium business that were approached declined the invitation. Therefore, for a bigger study that would seek to generalize the results, researchers should endeavor to have a more balanced number between small and medium businesses that participate. There was very limited literature on the topic of financial performance of SMEs as well. This resulted on the study having to be built on theory. RECOMMENDATIONS It is recommended that SMEs use more ratios, especially those in the literature study (Chapter Two) as improvement of their financial performance measures. SMEs should probably consider the use of the six most used ratios as summarized in section 5.3 above, since they seem to be working well not only for the majority of participants, but for businesses in general. It is also recommended that SMEs owners/ managers request and enroll their financial staff for training on bankruptcy prediction models at relevant institutions such as universities. The few models presented in this study may be used by SMEs as well, since they are simple and cheap, and should not pose problems to trained financial staff. Another recommendation would be for those SMEs that can afford it, to try the use of specialized software (e.g. PASTEL or PRO ACC5), which were indicated as effective by the few participants who use them. The SMEs would be able to use ratios that are computed from the software. The Z Score is also a critical business tool managers utilize to make informed business decisions to improve the financial health of the business. The Z Score helps managers assess the factors contributing to poor financial health. Z Score factors that contribute to under-performance; working capital, earnings retention, profitability and leverage can be isolated. This enables managers to initiate actions to improve the score of these factors contributing to financial distress. Targeting actions to specific under-performing stress factors allows managers to make capital allocation decisions that mitigate principal risk factors and produce optimal returns. Focus areas for managers to improve Z Score are transactions that effect earnings/ (losses), capital expenditures, equity and debt transactions. The Z Score provides a quantitative measurement into a company’s financial health. The Z Score highlights factors contributing to a company’s financial health and uncovers emerging trends that indicate improvements or deterioration in financial condition. The Z Score is a critical tool business managers use to assess financial health. It helps managers align business strategies with capital allocation decisions and provide transparency of financial condition to lenders and equity capital providers. Business managers use the Z Score to raise capital and secure credit. The Z Score is an effective tool to demonstrate credit worthiness to bankers and soundness of business model to investors. The Z Score is based on actual financial information derived from the operating performance of the business enterprise. It avoids biases of subjective assessments, conflicts of interest, brand and large company bias. The Z Score employs no theoretical assumptions or market inputs external to the company’s financial statements. This provides users of the Z Score with a consistent view and understanding of a company’s true financial health. SMEs should have proper financial planning. They should undertake both financing and investment program according to financial planning. SMEs should keep all records of financial transactions in a system way. This will provide accurate accounting and financial information for making both routine and non-routine managerial decisions by the management of SMEs. This will also enable lending agencies to conduct credit risk analysis; and rating agency to carry out the rating job for the SMEs. SMEs should introduce internal audit to restore effective financial control in the SMEs. SMEs need to have an effective management system as well as skilled manpower. This is expected to exert a positive influence in efficiency as well as productivity of SMEs. Good culture in the firm develops leadership in the organization who can be able to trace the financial distress early and thereby prevent SMEs from the exposition to financial and operating risk. SUGGESTIONS FOR FUTURE RESEARCH Further research could be conducted on a wider scale in an attempt to generalize the findings to manufacturing SMEs in Mauritius; and in different regions of Mauritius. Further research could also be done to determine whether the findings of the study are consistent across different sectors. Financial performance measurement of larger enterprises could be another subject of study as well. CONCLUSION It is fair to say that, contrary to what one may think, many manufacturing SMEs (with respect to the number of studied SMEs) in Mauritius, use financial ratios (one of the financial tools in the literature study) to measure their financial performance. Though, this use of ratios by the studied SMEs is limited, because only a few ratios are being used by the respondents. Yet again, out of the ratios used, few are among those in the literature that were found to be the best financial measures or good financial distress predictors. None of the respondents used any of the available bankruptcy prediction models. In fact, most of the respondents knew nothing or very little about the models. Some of the participants have opted for the use of computer software and are getting satisfying results from them. Although most of the respondents have performed fairly well so far, to improve their financial performance, SMEs should use more of the recognized ratios identified in this study. Six ratio s were identified to be widely used by the various SMEs interviewed, and because most of the respondents indicated that their financial performance has been satisfying (even though some said there is a need to improve), these ratios should be taken into consideration. SMEs need also to train their financial staff on other financial tools such bankruptcy prediction models that are quite easy to use. It was also pointed out in the literaturereview that ratio analysis and bankruptcy prediction models (since they consist of a group of ratios with variables of different weights) have their shortcomings as well. Therefore they should only be used as an indication. This study will contribute toward filling the gap in the literature of SME financial performance measurement; and if taken seriously by SMEs, will help them in effective financial performance measurement by drawing attention to the various tools that are available to them for that purpose and the necessity of training financial staff on various measures as well.

Ensure Justice and Equity Essay

On the one hand, fixed punishment will have a deterring effect on society. â€â€"Individuals knowing that they will be subject to a certain punishment if they are convicted with a given crime will reconsider committing this act in the first place. â€â€"This deterring effect also leads to social stability and security, through minimizing the number of crimes committed. â€â€"If people knew they would be able to convince the court or the jury of reason for having committed the crime they are accused of, penal decisions would be largely arbitrary. This would result into criminals getting away with their crimes and into a high level of injustice caused by the subjective approach of different courts。 In my opinion an intermediary position between both solutions is the perfect way to establish and ensure justice and equity. There have to be fixed punishment for all crimes. However, criminal laws have to provide for a minimum and maximum for the punishment and the laws also have to foresee certain cases of exemptions. An example for setting minimum and maximum penalties is Competition Law where a person being held liable of a crime under this law will be convicted to pay a fine, according to the harm caused by the violation and the profit gained by the violator through committing the crime. As for the exemptions, in some countries the law exempts thieves stealing food during a period of famine taking into consideration the distress and hunger. Also, a person killing in self-defense will be exempted from punishment.

Get the Scoop on Topics for Argumentative Essay Before Youre Too Late

Get the Scoop on Topics for Argumentative Essay Before You're Too Late The New Angle On Topics for Argumentative Essay Just Released Domestic terrorism isn't really an overwhelming issue in the united states. It's possible to go for an intriguing topic from any area of science. F. Bacon The main goal of the capital isn't to get as much money as possible, yet to guarantee that money causes a better life. Therefore, the topic needs to be debatable! Begin with general subjects that you are conversant with then narrow down to a certain topic. After you locate a proper topic it's imperative that you concentrate on proper research. Picking an emotional topic is also a great idea. What to Do About Topics for Argumentative Essay Before It Is Too Late By way of example, in college, you might be requested to compose a paper from the opposing standpoint. Every time you need to complete such tasks, the most crucial step is to decide on a controversial topic as it should provoke the debate in your upcoming audience and make them dispute it. You want to supply sample scenarios, along with other details to drive your point home. When you settle on the subject and select the position on which you will base your essay, the remainder of the job can then begin. In choosing your topic, it's frequently a good concept to start out with a subject which you already have some familiarity with. Unfortunately, you'll have to experience the subjects you have zero interest in, and might, sooner or later, feel as the ideal theme doesn't exist. When you're picking your topic, remember that it's much simpler to write about something which you currently have interest ineven in case you don't know a great deal about it. Whichever topic you select, always don't forget the value of literature sources. There are just a few things that define whether an essay you're working on is going to be a good one. One of the greatest approaches to make writing a research paper easier is to select a topic that you're passionate about. The very first step is to learn the topic you want to write about. You may trust us to supply expert assistance for many of your academic writing needs. Clearly, you ought not purposely choose a topic that will bore your audience. Set your objective first, then produce a means to write it in an intriguing manner for your readers to relish. They need to see the whole picture, and that is what you are to focus on. Topics for Argumentative Essay Can Be Fun for Everyone Next, you should consider the method on how you need to relay it to your readers. At the conclusion of these list, you are going to discover links to a variety of argumentative paragraphs and essays. Unfortunately, in regards to writing papers on unique assignments, there isn't any perfect collection of all of the strategies and options. When you are finished with the majority of your research you should make an outline. You are a genuine expert in regards to persuasive essay topics. Selecting an excellent topic for your essay is among the most significant and frequently tricky parts for many students. It is possible to observe a list of 25 topics you can pick from the one which best fits your assignment. Having selected a very good topic to argue about, at this point you will need to make an argumentative essay outline. Examples might also be included in every one of the body paragraphs to more support and clarify your primary points. You should be able to use persuasive language. Qualities of an excellent persuasive essay topic The topic needs to be specific. The topics must have two sides and they need to be quite interesting.

Summary Of The Assistance To The Elderly - 967 Words

Brief Facts: The Assistance to the Elderly, Inc., a 501(c)(3) organization is the umbrella company of Residential Plaza at Blue Lagoon, a non-profit assisted living facility providing services since 1990, subsequently, the age of the facility will require more funds for maintaining the structure and its surroundings. The facility accommodates 320 seniors with an income ratio of 80% low income and 20% medium income. The ethnic segmentation is 100% Hispanics and the average age is ?. Industry Challenges: What is the greatest challenge the assisted living facilities is facing? The industry faces numerous challenge from a dramatic increase in the elderly population, increase health cost, limited affordable housing and services. â€Å"The†¦show more content†¦The Memory Care program is for adults with Alzheimer’s Disease or other dementia-related disorders, offering affordable, 24-hour specialized care. The funding for this program will benefit the advancement of the Montessori for Aging and Dementia philosophy, an innovative approach to dementia care with the goal of supporting people with dementia by treating them with respect and dignity – enabling them to make choices and to live as independently as possible. The Infrastructure program will apply for grants that will assist the facility in the upkeep and maintenance of the building. The Staff Training program will allow the current and new staff to learn the latest best practices for caring for seniors. The Health and Wellness program will allow the growth of activities to meet the needs of seniors. Health Fair will be an outreach program for underserved communities in Miami, Florida. Caregivers Fair will be an outreach program for underserved communities in Miami, Florida. Person-Centered Care focuses on meeting the individual resident’s needs. 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