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The IUP Journal of Accounting Research and Audit Practices:

The Influence of Financial Literacy on the Performance of Small and Medium-Scale Enterprises

Article Details

Pub. Date	: Apr, 2019
Product Name	: The IUP Journal of Accounting Research and Audit Practices
Product Type	: Article
Product Code	: IJARAP31904
Author Name	: Asha Sharma
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 10

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Abstract

The Small and Medium-Scale Enterprises (SMEs) sector has been recognized worldwide for its role in economic advancement through various ways like wealth generation, employment creation and poverty reduction. Accounting techniques serve as a critical tool for recording, analyzing, monitoring and evaluating the financial condition of organizations, preparation of documents necessary for tax purposes, and providing information support to many other organizational functions. In the context of SMEs, accounting techniques are important as it can help the firms manage their short-term problems in critical areas like costing, cash flow and budgeting by providing information to support monitoring and control. The present paper examines the impact of financial literacy of entrepreneurs on the performance of SMEs. An inquiry into their level of adoption of financial literacy is also studied. A review of related literature is carried out to examine the extent of work done in this field. A structured questionnaire is used to collect data on the level of adoption of financial literacy. The results show that the level of adoption of financial literacy by entrepreneurs of SMEs is low and that the utilization of accounting records does not influence their performance and success rate.

Description

The Small and Medium-Scale Enterprises (SMEs) sector has been recognized worldwide for its role in economic advancement through various ways like wealth generation, employment creation, and poverty reduction (Kithae et al., 2012). SMEs are a fundamental part of the economic fabric in most developing countries, and they play a very important role in furthering growth, innovation and prosperity. Although small in size, they are the most important enterprises in the economy due to the fact that when all the individual effects are aggregated, they surpass that of the larger companies. The social and economic advantages of SMEs cannot be overstated.

SMEs are defined as non-subsidiary, independent firms which employ less than a given number of employees; this number varies across national systems. Parameters other than number of employees are used in categorizing businesses as SMEs.