The Relationship Between Financial Management Practices and Financial Performance of Smes in Nairobi Central Business District Kenya

Abstract

The objective of the study is to establish the relationship between financial management practices and financial performance of small and medium enterprises in Nairobi central business district. The financial management practices are said to be the functions conducted by the accountants, chief financial officer and directors in the department of budgeting, procurement, asset management and control.The researcher does not known any study that has been done determine the degree to which the SMEs have embraced financial management practices and how these practices have impacted on their performance. The research design used in the study was a cross-sectional research design and the secondary information and data was used to collect the data. The target population of this study was 398 SMEs operating in the Nairobi CBD the sample was 100. Data collected was collected using secondary data and analysis statistically using the regression and ANOVA.The analysis tool that was used is the SPSS. This statistic is significant level of 0.000confidence level with p = 0.000.The researcher studied financial performance of SMEs for five years starting from 2012 to 2015 financial years to establish the relationship between financial management practices and financial performance. The study four used aspects of financial management practices which were ratios that were derived from the financial statement namely; current ratio, asset turnover, debt to equity ratio size which is the natural log of sales.