Predictors of profitability of micro, small, and medium enterprises in the Philippines

Issue Date

12-2015

Abstract

Micro, small, and medium enterprises (MSMEs) contribute significantly to the socioeconomic development of any country in the world. As they grow in number and size, each business enterprise has to operate profitably to survive, grow, and expand. Given the importance of profitability in the good functioning and financial sustainability of the MSMEs, this study examined the key financial measures that influence their profit-generating capacity. Using the data from 201 annual financial statements of 67 MSMEs from 2011–2013, the regression analysis revealed that both asset turnover and debt ratio are significant predictors of profitability. By and large, these predictors imply that the strategic move of MSMEs should entail asset and debt management. The study recommends that the government redirect its policy directions more toward capacitating MSMEs on asset investing, utilization, and maintenance, and less toward access to financing.

Source or Periodical Title

International Journal of Business Research

ISSN

1555-1296

Volume

15

Issue

5

Page

35-46

Document Type

Article

Language

English

Subject

Financial performance, MSMEs, Profitability predictors, Return on assets, Return on equity, Return on sales

Identifier

doi:10.18374/IJBR-15-5.4.

Digital Copy

yes

Link to Full Text

Share

COinS