Effects of Financial Statement on the Performance and Growth of SME’s: A Survey of SME’s in Eldoret Langas Area

Abstract

The study investigates the effects of financial management statements on performance and sustainable growth of SME’s. It engaged a robust OLS econometric model to empirically analyze performance levels alongside the determining variables in this case the profit loss, incomplete records and balance sheet being the main explanatory variables. The findings revealed that performance of SME’s is significantly pegged on decisions based on the statements since, entrepreneurs who registered high profit levels, appreciated the positive and significant contribution of profit loss, incomplete records and the Balance sheet. However, entrepreneurs who registered Average, Low and Breakeven profit levels attributed the negatively significant and reversal effect of financial statement on the undesirable profitability rating. In addition, higher education level seemed to have had an insignificant impact on improving performance level but rather, a neutralization effect of sustaining the prevailing performance level from deteriorating. Hence, without an appropriate adoption of these statements in accordance with the business management ethics, growth and subsequent progress of SME’s in this region remains stifled at the start-up and Life-style development stages prescribed in the enterprise life-cycle model.

Keywords: Growth, SME’s, Profitability, Financial Statement