The Influence of Financial Management on the Growth of Small and Medium Scale Industries.
CHAPTER ONE
OBJECTIVES OF THE STUDY
The general objective of this study is to examine the influence of financial management on the growth of small and medium scale industries, using Adeyemi oil palm PLC as a case study. The specific objectives are:
- To ascertain the influence of investment practices on the growth of Adeyemi oil palm PLC.
- To establish the effect of working capital management practices on the growth of Adeyemi oil palm PLC.
- To determine the effect of financial reporting and analysis practices on the growth of Adeyemi oil palm PLC.
- To find out how financial planning practices influence the problem of lack of funding in Adeyemi oil palm PLC.
- To investigate the influence of accounting information systems on the growth of Adeyemi oil palm PLC.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
FINANCIAL MANAGEMENT PRACTICES OF SMES
Financial management basically deals with money circulation and control of money for all kinds of business operations including the SMEs (Lasher, 2010). Financial management practices are the central activities for the success of small business (Vohra & Dhillon, 2014). SMEs financial profitability is the conceived result of financial management practices. Financial management transactions cover various objectives starting with cost calculation, cost control, sales and profit maximization, attaining the market share and overall endurance ofa firm (Vohra & Dhillon, 2014). Small businesses have been using different set of financial management practices, core principles of financial management practices are not exercised, it run with short term financial management approach and run by the personal business goals of the owner (Lasher, 2010). Vohra & Dhillon (2014) was of the view that the lack of adoption of financial management practices by SMEs may be justified in the below described areas: absence of understanding effective interpretation of financial management information and uses of financial statement. SMEs are rare to effective use of risk management, liquidity, working capital, scientific inventory management, project valuation, thorough capital budgeting techniques, financial reporting and financial analysis which are core functioning areas of financial management practices and this issue is the most critical aspect for obtaining the best financial resources (Vohra & Dhillon, 2014). Basically, it is a fact that, every firm’s financial performance shows the financial health and it is an indicator of a firm’s financial soundness and profitability ((Vohra & Dhillon, 2014). Financial performance can be estimated or calculated with various tools, but each measure draws or portrays the different aspect of financial performance (Vohra & Dhillon, 2014). The efficient individuality of SME’s is to provide the large-scale employability and entrepreneurship through small business practices and provide a rational judgmental way of equitable division of national resources & income. In absence of this, resources either can be centralized or not effective utilized, which will certainly result of not achieving the sustainable and inclusive growth (Abor & Quartey 2010).
CHAPTER THREE
RESEARCH METHODOLOGY
RESEARCH DESIGN
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the influence of financial management on the growth of small and medium scale industries.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to examine the influence of financial management on the growth of small and medium scale industries. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of financial management on the growth of small and medium scale industries
Summary
The research work showed that the overall profitability in the small and medium scale industry will be enhanced if good financial structure is properly managed as measured by leverage, short term debt and equity. This therefore means that, small and medium scale industries operating in Nigeria should place more emphasis on equity funding compared to debt finance.
Conclusion
The study concludes that financial management practices (working capital management practices, investment practices, financial planning practices, accounting information systems and financial reporting and analysis practices) are major determinants of the growth of SMEs in Nigeria. The small and micro enterprises (SME) play an important role in Nigeria Economy. Inefficiencies in financial management result in poor financial performance and eventually lead to failure of SMEs. A high rate failure of failure of SMEs has adverse effects on the economy hence the need for sound financial management practices among Nigeria SMEs. The adoption of financial management practices provide opportunities for the business enterprise to respond to the various challenges within its operating environment. Thus SMEs should embrace strong financial management systems
Recommendation
SMEs should also be encouraged to diversify their products and move from the traditional practice of not venturing into other products
Further, SMEs should be advised to strengthen and put up policies regarding debtors on how to collect receivables, be able to know when to write off bad debts so as to minimize losses that accrue as a result of none payment. Similarly, efforts should be put by SME owners to ensure that inventory management is improved through setting re-order levels both for minimum and maximum so that the business does not run out of stock as well as tie too much capital in stock which affects the working capital. The ministries of finance and industrialization should provide a favorable platform for SMEs to access financing that can enable them to run their businesses at a reasonable cost of financing. This is necessary since access to bank loans was found to be difficult for SMEs and end up using only internally generated funds. The interest rates should be favorable; similarly the requirements to accessing such funding should also be reasonable so as not to push SMEs away.
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