operating cycle.docx

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Small and medium scale enterprises (SMEs) are drivers of economic growth in developed and emerging economies like Uganda. Although they constitute a large proportion of businesses, the SMEs' financial performance has been unstable over the years, and in extant literature this issue has been attributed to capital structure and other financing decisions. Empirical evidence indicates that more than 50% of SMEs in Uganda cease their operations within the first three years of operation, citing financial capacity issues such as inadequate liquidity. Hence, the aim of this work was to determine the mediating effect of financial capacity in the relationship between SME capital structure and financial performance. The study design was anchored in the agency, free cash flow, and stakeholder theories and the relevant data were gathered via a cross-sectional survey. A stratified sampling method was used to identify SMEs operating in the target area, and one respondent was purposively selected from every chosen SME. Although questionnaires were sent to 453 SMEs, only 423 valid questionnaires were obtained and were subjected to further analyses. Data were analyzed using descriptive statistics and multivariate analysis. The mediation test results indicate a partial but statistically significant mediation effect of financial capacity in the capital structure−financial performance relationship. We thus conclude that high levels of financial capacity strengthen the effect of capital structure on the financial performance of SMEs. Consequently, we recommend that SMEs maintain optimal levels of liquidity as well as financial solvency to optimize financial performance.

Utms Journal of Economics, 2014

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2013

Notes, 2002

Digest Finance, 2018

Importance In this research, we formulate a body of theoretical and conceptual principles for the business accounting model, which would make the general set of benchmarks to recognize and carry items of financial capital stocks in integrated reporting. Objectives It is reasonable to use the concept for maintaining the financial capital during its conversion into other types of capital. This provision of the business accounting model is based on specific accounting procedures for recognizing the creation of the financial capital value and its conversion and accompanied with respective comments. Methods The methodology rests on general theories of positive and normative economics and general methods of observation, abstraction, deduction and induction, statistical and fact analysis of economic phenomena. Results As a result of the research, we qualify financial assets, cash, equity instruments of the other entity and contractual rights as items of financial capital. They mainly determine its value. Goodwill is a part of the value of long-term financial instruments, rather than an intangible asset. Changes in its value signify the impairment of other assets, investee's assets. Accounts receivables shows the monetized portion of the financial capital value. Conclusions and Relevance To illustrate the result of the research, we perform accounting procedures by consecutively recognizing entries for forming the financial capital stock in the business accounting model and determining specific techniques-monetization of financial capital metrics and capitalization of cash which form and change the value of certain items of financial capital.

Economics Letters, 2015

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