The Relationship Between Investment Decisions and Financial Performance of Small and Medium Scale Enterprises in Limuru Town, Kenya

Abstract

Making an investment decision is one of the most important business decisions that a firm has to make for it to be competitive and efficient. The small and medium enterprises sector being a vital sector in the economy there is a great need to study the relationship between investment decisions made in those firms and the financial performance. The study aimed to achieve this goal and its objective was to assess the relationship between investment decisions and financial performance of small and medium scale enterprises in Limuru town, Kenya. To facilitate the attainment of this objective this research was designed as a survey study. The population of interest comprised small and medium enterprise firms in Limuru town. The respondents were firm owners who undertake investment decisions that affect the firm. The research used a questionnaire to gather primary data from the respondents. Data was presented using tables and pie charts. Both descriptive and inferential statistics were used to analyze the data by interpreting respondent information ranking variables and performing regression analysis which enabled the researcher to test the relationship between investment decisions and financial performance. The study found that investment decisions affected the financial performance in small and medium scale enterprises, thus a recommendation from the study to small and medium scale enterprises firm owners for the need to make prudent investment decisions for their firms because those decisions do affect the firm‟s financial performance.