THE IMPORTANCE OF FINANCIAL ACCOUNTING LITERACY ON THE GROWTH, DEVELOPMENT, SURVIVAL, PRODUCTION AND PERFORMANCE OF SMES
chapter One
Foreword
1.1 Research background
Financial literacy remains an interesting topic in both developed and developing countries, and has recently received a great deal of attention due to the rapidly changing financial landscape. Atkinson and Messy (2005) define financial literacy as the ability of consumers/investors to understand financial instruments and their concepts, and to evaluate financial risks and opportunities, make informed decisions and where to find help. defined as the combination of the ability and confidence to know what to ask for and to take other effective actions. to improve their financial well-being.
Financial literacy helps investors develop financial literacy in a way that is relevant to their business and use that knowledge to evaluate products and make informed decisions. Improving financial literacy is widely expected to help overcome recent difficulties in advanced credit markets. Financial literacy prepares investors for tough financial times through risk-mitigating strategies such as: B. Accumulate savings, diversify assets, and purchase insurance. Financial literacy facilitates the decision-making process of paying bills on time, managing debt properly, improving the creditworthiness of potential livelihood borrowers, growing economies, sound financial systems, and alleviating poverty. . You can also use financial products and services more effectively, be less vulnerable to overzealous retailers and fraudulent schemes, and have more control over your financial future. Financial regulators are forced to improve the efficiency and quality of financial services in the face of an educated population. This allows financially savvy investors to compete with financial institutions to offer more reasonably priced and transparent services by comparing options, asking the right questions and negotiating more effectively. It’s because you’re under pressure. Investors can then evaluate and compare financial products such as bank accounts, savings products, credit and loan options, payment instruments, investments and insurance coverage to make the best decision (Miller, Godfrey , Levesque, and Stark, 2009). . Lack of business and management skills can increase financial barriers for small businesses. Low levels of financial literacy prevent small businesses from properly evaluating and understanding various financing options and managing complex loan application processes. Similarly, the fact that small businesses’ accounting and financial statements are often not transparent makes them high-risk borrowers and therefore unattractive to lenders. Building the capacity of SMEs to prepare financial statements and business plans, improve financial literacy, and conduct management training has been proven to have a positive impact on SME development. In addition, SMEs’ market access can be improved by strengthening horizontal ties with other SMEs and vertical ties with large enterprises. (Hoggerhand Hilgart, 2002).
1.2 Problem Description
A number of studies have been conducted in developed countries and have shown an important link between financial accounting competence and the growth and survival of SMEs. However, there are different perceptions of financial accounting competence due to multiple factors. A major concern is that small business owners do not correctly understand the importance of accounting and business concepts, and lack the information (financial nature) to anticipate future contingencies. You are hurting your business because you are This necessitated this study to examine the impact of financial accounting literacy on the growth and survival of SMEs in Kwara State, Nigeria. This research will help small business owners and individuals interested in similar businesses understand the impact of financial accounting skills on small business growth and survival.
1.3 Research question
In the course of this work, the following research questions will be pursued:
Me. What impact do financial accounting skills have on small business growth?
ii. How does financial accounting ability affect the survival of small businesses?
1.4 Research Basis
Lusardi and Mitchell (2006) found that financial literacy is prevalent and particularly severe in certain population groups, such as women, the elderly, and the uneducated. Agarwal, Driscoll, Gabaix, and Laibson (2007) further show that financial errors are prevalent among young and old with the lowest levels of financial literacy and cognitive skills. Again a study by the OECD (2005) and the work by Lusardi and Mitchell (2007) which review the evidence on financial literacy across countries show that financial illiteracy is a common feature in European countries, Australia, and Japan. These findings were confirmed in the work of Christelis, Jappelli and Padula (2006), which used micro data from European countries to find that most respondents in Europe scored low on financial numeracy and literacy scales
This study will be very useful in that the previous studies carried out on financial literacy used Europe and other developed countries of the world as its case study, but this study will focus on Nigeria and most especially Kwara state to be specific as it will serve as a guide for SME owners in this part of the world to know the impact of financial accounting literacy on the growth and survival of their enterprise. This study will be very useful in that a lot of businesses in Kwara state today hit the rocks due to illiteracy on financial management matters.
1.5 Objectives of the Study
The main objective of this study will be to determine the importance of financial accounting literacy on the growth, development, survival, productivity and performance of SMEs in Kwara state.
The specific objectives are to:
i. Determining the impact of financial accounting skills
ii. determine the impact of financial accounting literacy on the survival of small businesses;
1.6 Research hypothesis
The hypotheses tested in this study are:
H01:
There is no significant association between financial accounting skills and SME growth in Kwara State.
H02:
In Kwara State, there is no significant association between financial accounting proficiency and SME survival.
1.7 Scope of investigation
This study focuses on all SMEs in Kwara State. However, using a simple random sampling technique, only three municipal districts (Ilorin South, Ilorin North, and Ilorin East municipal districts) were selected for this study.
1.8 Curriculum
This study contains five chapters. Chapter 1 serves as an introduction, providing background to the research, problem statement, purpose of the research, and research questions. Chapter 2 presents a literature review including conceptual framework, theoretical background, and empirical evidence. Chapter 3 focuses on research methodology, study design, data analysis methods, data collection methods, sampling techniques, and reports on the study population. Data presentation, analysis, and interpretation are covered in Chapter 4, and finally, Chapter 5 provides summaries, conclusions, and recommendations.
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