Financial Performance of Micro, Small and Medium Enterprises (MSMEs) in the Philippines

Abstract

The study analyzed the financial performance of selected micro, small, and medium enterprises using secondary data from financial statements for the past three years. Results showed the enterprises performed favorably in liquidity, activity and leverage but suffered from a low-level profitability. Using correlation analysis, the results show a significant linear relationship between liquidity and activity, liquidity and leverage, and activity and leverage. However, each of these measures has no significant relationship with profitability. Using t-tests, the results show no significant difference in the liquidity, profitability, and inventory turnover of the enterprises when grouped according to organizational form, business type, and asset size. However, a significant difference exists in receivable turnover, asset turnover, and debt ratios. The study recommends the MSMEs should revisit their strategies for improving profitability and use financial performance information in making critical decisions. Firms should connect financial performance to the larger external environment of the business so they will continue to play an important role in the growth of the economy.

Keywords: Financial Performance, Organizational Form, Business Type, Asset Size

JEL Classification: M00, M40