Financial Management Practices and Financial Performance of Medium Enterprises in Somalia; A Case of Mogadishu City.
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Date
2024-10-10
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Makerere University Business School
Abstract
The study assessed the influence of financial management practices on the financial performance of medium enterprises in Mogadishu city in Somalia. The specific objectives were as follows: To inspect the relationship between CBD and FP of MEs in Mogadishu City in Somalia, to examine the association between WCM and FP of MEs in Mogadishu City in Somalia, to find the affiliation between financing decisions and FP of Medium Enterprises in Mogadishu City in Somalia and to establish the relationship between profit-sharing decisions and FP of MEs in Mogadishu city in Somalia. The study sample comprised 313 medium enterprise owners of the different categories of medium enterprises in Mogadishu, Somalia. A questionnaire was used to gather data. The findings show that medium enterprises exhibit a nuanced understanding of capital budgeting, emphasizing factors such as project lifespan, long-term financing, and risk assessment to align investment decisions with long-term profitability objectives. Effective WCM emerges as a crucial determinant of financial performance, with efficient management of accounts receivable, inventory, and payables positively impacting overall financial health. Regarding financing decisions, medium enterprises achieve equilibrium by leveraging sales revenue, optimizing tax efficiency, and adopting conservative financial management practices. Notably, there is a preference for internal revenue for expansion, reflecting a strategic approach to minimize debt burden and maintain financial flexibility. Furthermore, the integration of profit-sharing arrangements underscores the significance of employee engagement in driving business success. Enterprises prioritizing profit-sharing tend to experience better financial outcomes, highlighting the importance of aligning employee incentives with organizational goals. The study emphasizes the crucial part of effective financial decision-making in achieving sustainable growth, enhancing operational efficiency, and maximizing shareholder value with medium enterprises.
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This is a master's thesis.
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Abdikadir, I. A. (2024) Financial Management Practices and Financial Performance of Medium Enterprises in Somalia; A Case of Mogadishu City. (Unpublished master’s dissertation). Makerere University Business School, Kampala, Uganda.