The Financial Management Practices of Small and Medium Enterprises in Sri Lanka.

Rathnasiri, U. A. H. A.

Small and Medium Enterprises (SMEs) play an important role in any economy as they are capable of generating employment, promoting the growth of Gross Domestic Product (GDP), embarking on innovations and stimulating of other economic activities. This sector is said to be the backbone of all developed and developing nations. Thus, the development of SME sector is of paramount important for any country irrespective of their level of development, since this sector has great potential to generate maximum socio economic benefits to the country with minimum level of investment. The purpose of the study is to investigate the availability of differences in the adoption of financial management tools and techniques among Sri Lankan SMEs with reference to different aspects of businesses such as legal form, size and age of the business, level of education of the owner/manager, location and leverage. Non-parametric Kruskal-Wallis test and Mann Whitney U test were used to test the hypothesized relationships. Results of non parametric tests revealed that legal form, size of the business based on number of employees, education background of owner/manager, leverage of the business are the variables which showed statistically significant differences in adoption of financial management tools and techniques. However, the variables of number of operative years under existing management and the location of the business did not determine significant differences in adoption of financial management tools and techniques. These findings concluded that SMEs should highly regard financial management and contemplate financial management practices as one of the tools to improve and increase the profitability.

SRI Lanka; FINANCIAL management; INDUSTRIAL management; SMALL business; KRUSKAL-Wallis Test; ANALYSIS of variance

Global Journal of Contemporary Research in Accounting, Auditing & Business Ethics, 2015, Vol 1, Issue 2, p374

2311-3162

Academic Journal