Tiến Sĩ Impact of Financial Management on the Profitability of Small and Medium Trade and Service Enterprise

Luận án tiến sĩ năm 2013
Đề tài: Impact of Financial Management on the Profitability of Small and Medium Trade and Service Enterprises in Thai Nguyen Province
Ảnh hưởng của quản lý tài chính và một số khía cạnh tài chính đến lợi nhuận của doanh nghiệp vừa và nhỏ thương mại và dịch vụ trong tỉnh Thái Nguyên
Luận án bằng tiếng Anh


TABLE OF CONTENTS
ACKNOWLEDGEMENTS . ii
ABSTRACT . iii
LIST OF TABLE vii
INTRODUCTION . 1
1.1. BACKGROUND OF THE STUDY . 1
1.2. STATEMENT OF THE OBJECTIVES . 2
1.3. HYPOTHESIS . 4
1.4. SIGNIFICANCE OF THE STUDY . 4
1.5. SCOPE AND LIMITATIONS OF THE STUDY . 5
1.6. DEFINITION OF TERMS . 6
Chapter 2 . 8
REVIEW OF RELATED LITERATURE AND STUDIES 8
2.1. QUALITATIVE DEFINITIONS OF SMES . 8
2.2. QUANTITATIVE DEFINITIONS OF SMES 9
2.3. FINANCIAL MANAGEMENT FOR SMES . 10
2.4. FINANCIAL MANAGEMENT PRACTICES . 13
2.5 FINANCIAL ASPECTS . 17
2.6 SME PROFITABILITY 19
2.7. RELATIONSHIPS BETWEEN FINANCIAL MANAGEMENT AND SME
PROFITABILITY 22
2.8. THE MODEL OF IMPACT OF FINANCIAL MANAGEMENT ON SME
PROFITABILITY 22
2.9. CONCEPTUAL FRAMEWORK . 23
Chapter 3 . 24
METHODOLOGY 24
3.1. RESEARCH DESIGN . 24
3.2. LOCALE OF THE STUDY . 25
3.3 BUSINESS STRUCTURE AND SMES IN THAI NGUYEN PROVINCE . 25
3.4 SAMPLING DESIGN AND TECHNIQUES 25
3.5 DETERMINATION OF SAMPLE SIZE 26
3.6SUBJECT OF THE STUDY . 26
3.7. RESEARCH INSTRUMENT 27
3.8. DATA GATHERING PROCEDURE 36
3.9. DATA PROCESSING METHOD 37
3.10. STATISTICAL TREATMENT 37
Chapter 4 . 39
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA . 39
4.1. DESCRIPTIVE OF THE RESEARCH STUDY 39
4.2 ASSOCIATIVE ANALYSIS OF THE RESEARCH STUDY . 62
Chapter 5 . 71
SUMMARY, FINDINGS, CONCLUSIONS AND RECOMMENDATIONS . 71
5.1 SUMMARY . 71
5.2 FINDINGS . 73
5.3 CONCLUSIONS 76
5.4 RECOMMENDATIONS 77
BIBLIOGRAPHY . 79
APPENDIX 1 82
APPENDIX 2: SURVEY INSTRUMENT . 83
SURVEY OF FINANCIAL MANAGEMENT PRACTICES . 83
OF SMEs IN THAI NGUYEN CITY 83
APPENDIX 3: REGRESSION 95
APPENDIX 4: CORRELATIONS . 97


ABSTRACT
This dissertation examines the relationship between financial management and
profitability of SMEs to determine whether financial management practices and financial
aspectsimpact on SME profitability.
Specific Objectives of the disertationare:
1. To determine the profile of the respondents in terms of the following
1.1. The form of business organization affiliated with
1.2. Position in the company
1.3. Highest educational attainment
1.4. Attendance to financial management-related trainings
2. To Identify the financial management practices of the company in terms of the
following areas:
2.1. Accounting information system
2.2. Working capital management
2.3. Fixed asset management
3. To assess the company in terms of the following financial aspects:
3.1. Liquidity
3.2. Financial leverage
3.3. Activity
4. To know the relationship of financial management practices and financial aspects
to the company’s profitability in terms of the following:
4.1. Return on sales
4.2. Return of assets
4.3. Return on equity
5. To develop a model for the SME’s profitability
iv
6. To propose solutions to improve the company’s and SME’s profitability
In this research , both survey and secondary data methods are used in combination.
Survey was chosen to investigate financial management practices. The secondary data
method was used to examine the financial aspects.
Respondentsin this study can be: Owner, Manager, Chief-accountant of SMEs located
in Thai Nguyen City .
The disertationprovides descriptive findings of financial management practices and
financial aspects and demonstrates the simultaneous impact of financial management
practices and financial aspectson SME profitability. In addition, the research study provides
a model of SME profitability, in which profitability was found to be related to financial
management practices and financial aspects. With the exception of debt ratios, all other
variables including cash ratio, total asset turnover, accounting information systems, working
capital management and fixed asset management were found to be significantly related to
SME profitability.


Chapter 1
INTRODUCTION
This chapter provides a general introduction to the research study. The purpose is to
establish foundations for following chapters and the study as a whole, by providing a general
picture of the study. This chapter is structured into ten sections
Section 1.1 examines the research background where the research problem is identified.
Section 1.2 defines the research problem, presents a statement of the problem and expands
the research problem in two subsections 1.2.1 and 1.2.2. Subsection 1.2.1 presents research
objectives that the study covers in the process of solving the research problem defined.
Subsection 1.2.2.addresses the research questions that will be respectively answered in
chapters of the study
Section 1.3 provides hypothesisof this study. Section 1.4 and section 1.5 points out the
significance and scope of the study. Lastly, section 1.6 presents definition of terms
1.1. BACKGROUNDOF THE STUDY
Vietnam was a strong command-economy system in the mid-1980s. The difficulties
from years of war and the inefficiency of the command-economy system had led the
Vietnam economy to crisis. Face with stagnant growth, shortage of food, deficit budgets,
increasein inflation and trade imbalances, the Government of Vietnam startedan economic
renovation policy in 1986.
According to Vietnam Chamber Of Commerce And Industry (VCCI), since the
government introduced the series of economic reform, the private sector has rapidly grown in
terms of the number of businesses, capital and employees. From the base of zero in 1991,the
number of private businesses, limited companies and joint stock companies had quickly risen
to 543.963 in 2011 and almost all are small and m edium enterprises (SMEs). SMEs have
2
contributed considerablyto growing GDP and creating jobs for labour-age people as follows
(VCCI):
Total of capital was 6.000.000 billion VND
Providing a large number of diversified products, occupying 40percent of GDP
Creating jobs for 26million people,
Mobilizing temporarily unused resources such as land, capital labour and management
skills to develop production, and
Increasing export volume and lessening trade deficits.
Originating from recognition of the increasingly important role and contribution of
SMEs as well as the recent promotion and supporting policy on developing SMEs, this
research study the Impact of Financial Management on the Profitability of Small and
Medium Trade and Service Enterprises in Thai Nguyen Province.
1.2. STATEMENT OF THE OBJECTIVES
The problem that SMEs in Thai Nguyen province face appears to be that inefficient
financial management has adversely affected their profitability (Thai Nguyen Young
Businesses's Union 2010). Therefore, the problem to be addressed in this research is to
investigate effects of Financial aspects and financial management practices on SME
profitability, and then, to determine the best measures for improving SME profitability in
ThaiNguyenprovince by using efficient financial management tools.
1.2.1. Research objectives
In solving the research problem and answering the research questions mentioned
previously, this study has the following objectives:
1)To determine the profile of the respondents in terms of the following
1.1) The form of business organization affiliated with
3
1.2)Position in the company
1.3)Highest educational attainment
1.4)Attendance to financial management-related trainings
2) To Identify the financial management practices of the company in terms of the
following areas:
2.1)Accounting information system
2.2) Working capital management
2.3)Fixed asset management
3)To assess the company in terms of the following financial aspects:
3.1)Liquidity
3.2)Financialleverage
3.3)Activity
4)To know the relationship of financial management practices and financial aspects
to the company’s profitability in terms of the following:
4.1)Return on sales
4.2)Return of assets
4.3)Return on equity
5)To develop a model for the SME’s profitability
6)To propose solutions to improve the company’s and SME’s profitability
1.2.2. Research questions
The research problem defined above leads to the following research questions:
1) How important are financial management practices and financial aspects to SME
profitability?
2) What are the relationships between financial management practices, financial
aspectsand SME profitability?
4
3) How do financial management practices and financial aspects affect SME
profitability?
4) Whataction can improve profitability of SME in Thai Nguyen province?
1.3. HYPOTHESIS


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