CHAPTER FIVE

DISCUSSIONS, RECOMMENDATIONS AND CONCLUSIONS

1. INTRODUCTION

The SME sector development is seen as a key strategy for economic growth, job generation and poverty reduction (Agupusi, 2007:2). This study endeavored to explore and describe the financial performance measures currently used by manufacturing SMEs in Mauritius. It was undertaken due to the fact that many studies were conducted on obstacles faced by SMEs in obtaining finance, but it appeared that not enough were undertaken on how these SMEs manage their finances; whereas some studies found that small businesses fail because more often than not cash flow is not properly managed (Mbonyane, 2006:18). In this context the Z-score model is presented as a useful bankruptcy model for SME.

This chapter concludes the research project by summarizing the previous chapters and highlighting the results of the empirical study in Chapter Four with respect to the objectives of the research. It also includes comments on the contribution and limitation of the study as well as recommendations and suggestions for future research.

2. SUMMARY AND OVERVIEW OF THE RESEARCH

Chapter One presented the background of the study, followed by problem statement, rationale and objectives of the research, a preliminary literature review, research methodology and layout of the Chapters.

Chapter Two presented a literature review regarding SMEs and their role in the Mauritian Economy. It was shown that the development of a sound SME sector is a key factor in job creation and economic growth for Mauritius. Many obstacles were pointed out as causes of SME failure, including financial performance skills, which were the focus of this study. Moreover, an international comparative analysis was presented. A brief discussion of non-financial measures was given as well, followed by financial performance measures that included financial ratios and bankruptcy prediction models.

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Chapter Three presented the research plan including sampling, data collection, and data analysis.

Chapter Four presented the results of the empirical research findings on financial performance measures currently used by manufacturing SMEs in Mauritius. Thematic content analysis was used in presenting the results, taking the themes in the literature of the topic as basis for comparison.

Chapter Five is the final phase of the study and aims at using the information from the literature study and the empirical findings to provide solutions to manufacturing SMEs’ financial performance measurement according to the findings and through recommendations.

3. DISCUSSIONS OF FINDINGS

FINANCIAL PERFORMANCE MEASUREMENT

The first objective of the study was to identify financial tools currently used by manufacturing SME’s in measuring their financial performance.

This objective of the study was achieved during the field study with semi-structured interviews at SME premises that helped gather information on the financial performance measures used by each. The findings revealed the following ratios as the most widely used by respondents:

• Cash flow to total debt (used by six respondents);

• Current ratio (used by six respondents);

• Working capital to total assets (used by five respondents);

• Cash flow to average total current liabilities (used by five respondents);

• Gross profit margin ratio (used by four respondents); and

• Inventory turnover (used by four participants).

• Gross Profit Ratio

The level of satisfaction was measured using a likert scale. The conversion of the 5- point Likert- type scale for the satisfaction with current financial performance scale to illustrate the total score was as follows: (not satisfied at all = 1 (1), not satisfied = 2 (2), somewhat satisfied = 3 (3), satisfi