Exploring the influence of profitability analysis on SME financing: A conceptual view

Abstract

By allocating earnings and expenditures to each client independently, customer profitability analysis is a management accounting and credit underwriting tool that enables businesses and lenders to assess the profitability of individual customers or segments of customers. Small and medium-sized businesses (SMEs) constitute the backbone of most economies and a key driver of economic expansion. This conceptual study surveys the literature on the subject in order to make assumptions that might be tested in subsequent research on the role of cost-benefit analysis in raising corporate performance. This is accomplished by referencing the viewpoints on financing small and medium-sized businesses as well as the fundamentals of strategic management accounting. The financial services sector, as well as the informal and formal sectors of the economy in every nation, would benefit greatly from an investigation into this issue. The originality of this conceptual study is in its contribution to the advancement of conceptual, methodological, and theoretical justification for the effects of profitability analysis funding of small and medium-sized enterprises. This will support the discussion in the present literature.