SMEs' Use Of Financial Statements For Decision Making: Evidence From Pakistan

Abstract

Financial statements comprise of insightful statistics about likely risk and the return associations of many decisions and have significant role in firms’ success, particularly for SMEs. Thus, through a sample of 94 Pakistani small and medium enterprises (SMEs), this study inspects the influences that could have impact on firms’ practice of the financial statements in making significant financial decisions. Principle component analysis finds key factors which define use of financial statements containing; experience, knowledge and ability. Logit analysis then discloses that these variables have significant association with whether Pakistani SME owners use financial statements while making business decisions. Findings indicates that the owners of Pakistani SMEs practice financial statements in decision making rendering to their knowledge about financial statements, experience and finally their ability to interpret figures confined in financial statements. Outcomes should be valuable for SME owners, educators, and the service providers.