Universal Journal of Accounting and Finance Vol. 9(6), pp. 1524 - 1532
DOI: 10.13189/ujaf.2021.090629
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The Financial Factors Affecting the Financial Performance of Philippine MSMEs


John Guay Pagaddut *
College of Business and Management, Ifugao State University, Lagawe, 3600, Ifugao, Philippines

ABSTRACT

Micro, small and medium enterprises (MSMEs) are considerably contributory to social and economic progress and prosperity through their entrepreneurial capacities and capabilities. However, they experience constraining challenges that importunately impair their abilities, failing to optimally engage themselves in the privileging opportunities around, particularly in the financial aspect. This paper aims to establish the financial factors affecting the financial performance of Philippine MSMEs whose audited financial statements are utilized to extract financial ratios needed for the study. It also aims to determine the factor structure that can explain the variation among these financial factors and to determine the cohesive cluster that can separate these financial factors. It employed multiple linear regression, factor analysis and cluster analysis in order to respectively achieve its objectives. It establishes that debt ratio, asset turnover and gross profit margin have a significant effect on return on assets. It further establishes that there are two significant factor structures, namely "Sustainability" ratios and "Efficiency" ratios, explaining the variation among these financial ratios. It furthermore establishes that there are two cohesive clusters, namely "good" ratios and "poor" ratios, separating these financial ratios. It suggests that MSMEs should remain self-sufficient and self-reliant, without unreasonably depending on debts, hence should adequately afford capital to finance their businesses. Further, they should optimally operate to generate sales by efficiently employing their resources. Furthermore, they should judiciously control costs, without compromising quality of their products and services, in order to increase their margin. They should reinforce their performance by regularly advancing their efficiency and sustainability. They should work well to sustain good ratios and improve poor ratios. Notably, this paper suggests that stakeholders sustainably support MSMEs in light of creativity and collaboration.

KEYWORDS
MSMEs, Financial Factors, Financial Performance, Philippines

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] John Guay Pagaddut , "The Financial Factors Affecting the Financial Performance of Philippine MSMEs," Universal Journal of Accounting and Finance, Vol. 9, No. 6, pp. 1524 - 1532, 2021. DOI: 10.13189/ujaf.2021.090629.

(b). APA Format:
John Guay Pagaddut (2021). The Financial Factors Affecting the Financial Performance of Philippine MSMEs. Universal Journal of Accounting and Finance, 9(6), 1524 - 1532. DOI: 10.13189/ujaf.2021.090629.