EconPapers    
Economics at your fingertips  
 

Short-Term Debt and Financial Performance of Small and Medium Scale Enterprises in Buganda Region, Uganda

Henry Mugisha, Job Omagwa and James Kilika
Additional contact information
Henry Mugisha: Department of Accounting and Finance, Kenyatta University, Kenya
Job Omagwa: Department of Accounting and Finance, Kenyatta University, Kenya
James Kilika: Department of Business Administration, Kenyatta University, Kenya

International Journal of Finance & Banking Studies, 2020, vol. 9, issue 4, 58-69

Abstract: Short-term debt is regarded as an important source of financing for Small and Medium-sized enterprises (SMEs). This is because it can be easily accessed and useful during times of emergent working capital shortage. However, short-term debt is the least researched among the components of capital structure, which explains why its contribution to the financial performance of small and medium-sized businesses still lacks empirical validation especially in the Ugandan context.This paper sought to determine the effect of short-term debt on financial performance of Small and Medium Enterprises in Uganda. The study adopted a descriptive cross-sectional research design to collect and analyse the data. Stratified random sampling technique was used to select SMEs while purposive sampling technique was used to select one key respondent from each of the sampled 453 SMEs in Uganda. Primary data was collected using survey questionnaire. Data was analysed using descriptive statistics and simple linear regression analysis. The findings indicted that short-term debt had a negative and significant effect on financial performance of SMEs as measured by return on assets. The study provides empirical evidence to support the propositions in the extant literature that short-term debt significantly hampers financial performance of SMEs. The study recommends that SMEs should adopt low cost operation procedures to improve profitability. This would lead to accumulated profits that can be used for investment purposes as a means of driving growth among the SMEs without resorting to borrowing. This paper suggests that further research should be conducted to establish the justification for the negative and significant effect of short-term debt on financial performance using qualitative approaches.

Keywords: Short-term debt; Financial performance; Small and Medium scale Enterprises (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/910/710 (application/pdf)
https://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/910 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rbs:ijfbss:v:9:y:2020:i:4:p:58-69

Access Statistics for this article

International Journal of Finance & Banking Studies is currently edited by Prof.Dr.Hasan Dincer

More articles in International Journal of Finance & Banking Studies from Center for the Strategic Studies in Business and Finance Istanbul Medipol University, School of Business. Contact information at EDIRC.
Bibliographic data for series maintained by Hasan Dincer ().

 
Page updated 2022-05-02
Handle: RePEc:rbs:ijfbss:v:9:y:2020:i:4:p:58-69