The Impact of Financial Management Practices on Financial Performance of Small and Medium Plantation Companies in the Kalutara District, Sri Lanka

Abstract

Small and Medium Enterprises (SMEs) are critical to the economy. SMEs exist in every sector of the economy. The plantation sector is a landmark cable manufacturing industry in the economy of Sri Lanka. The plantation sector presently has more business ventures with SMEs. Therefore, the purpose of this research is to examine the impact of financial management practices on the financial performance of SMEs in the plantation sector. This study considered financial management practices as the independent variable and the financial performance of SMEs as the dependent variable. The data for this study was collected using a questionnaire that was distributed to 40 SMEs in the plantation sector in the Kalutara district using a purposive convenience sampling method. The data was analyzed by using correlation analysis and regression analysis. According to the correlation analysis, the findings revealed that all variables were positively correlated with financial performance. Further, the regression analysis indicated that working capital management practices, capital structure, management practices, and financial reporting and analysis practices significantly affected financial performance. The quality of financial performance through employing financial management practices (FMPs) in plantation sector SMEs would be crucial for proprietors, managers, executives, employees, and other interested parties who can reasonably practice utilizing organizational resources for optimal financial performance. This study continues the discussion on numerous practical suggestions and provides directions for future research.