Relationship Between Financial Reporting and Analysis Practices and Financial Performance of Small and Medium Enterprises in Kenya

Abstract

Small and Medium-sized Enterprises (SMEs) play an important role in any economy through generation of employment, contributing to the growth of Gross Domestic Production (GDP), embarking on innovations and stimulating of other economic activities. The objective of the study was to establish the financial reporting and analysis practices adopted by small and medium enterprises in Kenya and to establish the relationship between financial reporting and analysis practices and financial performance of small and medium enterprise in Kenya. The study adopted a descriptive cross-sectional research design. The target population comprised of the top 100 SMEs in Kenya for the year 2012. The researcher used simple random sampling to select 50 respondents. Primary data is information gathered directly from respondents and for this study the researcher used questionnaires. Quantitative data collected was analyzed by the use of descriptive statistics using SPSS and presented through percentages, means, standard deviations and frequencies. The information was displayed by use of bar charts, graphs and pie charts and in prose-form. The study found that there is a strong positive relationship between financial reporting, financial analysis, financial management and management accounting and financial performance of SMEs. There is need for management of Small and medium enterprise in Kenya to enhance their financial reporting practices, financial analysis practices ,financial management practices and management accounting practices as it was found that financial reporting and analysis practices affects the financial performance of small and medium enterprises in Kenya .