Factors affecting financial stability of small and medium enterprises: A case study of emerging markets
Open Access
- 9 February 2017
- journal article
- Published by Virtus Interpress in Risk Governance and Control: Financial Markets & Institutions
- Vol. 7 (1), 7-17
- https://doi.org/10.22495/rgcv7i1art1
Abstract
Small and Medium Enterprises (SMEs) play a significant role in the South African economy as they provide job opportunities to communities and contribute to the South African gross domestic product. However, the majority of small businesses lack financial skills, which results in the falsification of financial information and analysis and inaccurate financial reports leading to decline of confidence by investors and negative impact on stakeholders. Therefore, this study examines the critical factors that affect SME’s financial stability which in the long run result in the liquidation of SMEs. The study was descriptive and quantitative in nature, using questionnaires to collect data from a sample of one hundred and twenty (120) SMEs across the Durban area. The findings show that lack of understanding of financial reporting has a negative impact on the financial stability of the business. Also the lack of insufficient financial experience proved to have a negative impact on the financial stability of SMEs. The study recommends that a short accounting programme should be developed by government incubators to assist and provide owners and accounts staff of SMEs with practical experience in financial reporting in order to increase their level of understanding financial reporting processes.Keywords
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