The Impact of Financial Management Strategies on the Financial Performance of Small to Medium Enterprises (SMEs) in Harare
- Author
- Mujaranji, Prosper K.
- Title
-
The Impact of Financial Management Strategies on the Financial Performance of Small to Medium Enterprises (SMEs) in Harare
- Abstract
- This research addressed impact of financial management strategies on the financial performance of SME in Harare. SMEs in Harare face challenges in effectively managing their finances, which can significantly impact their financial performance. Therefore, understanding the impact of financial management strategies on the financial performance of SMEs in Harare is essential for identifying effective measures to improve their overall success and sustainability. The study was carried out in Harare. The objectives of study were firstly to determine the influence of financing strategies on the financial performance of SMEs, the second objective was, to examine how SME’s reinvestment decisions affects their financial performance and the last objective was, to demonstrate the impact of dividend payment policies on the financial performance of SMEs. The objectives were explained using the Pecking Order Theory, Resource Based View Theory and the Signaling Theory. The study used a descriptive research gives a detailed result of the target population. This study used a sample size of 100 SMEs,100 questionnaires were administered, with a response rate of 75%. Results indicate that most of the small business owners and managers in Harare are young, highly educated individuals, with black-owned businesses being predominant. Internal funds are the preferred financing strategy, followed by borrowing and equity financing. Reinvestment decisions, particularly using payback period and net present value, significantly influence financial performance. Moreover, dividend policies show a tendency to prioritize retaining earnings over distributing dividends. Correlation and regression analyses reveal strong positive relationships between financing strategies, reinvestment decisions, dividend policies, and financial performance. These findings underscore the importance of sound financial management practices in driving SME success in Harare. This research helps readers to grasp factors influencing SME business performance and provides insights for policymakers and practitioners to enhance SME growth and sustainability. The study emphasizes that financial institutions educate SMEs on basic financial strategies and components in order for SMEs to boost financial performance. The author recommends improving access to affordable financing options, offering basic introductory courses to information technology.
- Date
- 2024
- Publisher
- BUSE
- Keywords
- Financial management
- Financial performance
- Supervisor
- N/A
- Item sets
- Department of Accountancy