The quality of financial information and performance of small and medium enterprises survey in Kampala

Abstract

The quality of financial information is crucial in to organization’s success and sustainability in today’s highly competitive and global economic environment. According to IFRS (2013), the fundamental qualitative characteristics of useful financial information are relevance and faithful representation with the enhancing qualitative characteristics of useful financial information including; comparability, verifiability, timeliness and understandability. The study covered these characteristics and how they enhance performance. The study variables included relevance, faithful representation and understandability in relation to performance of SMEs. A survey design was used in this study to cover SMEs in different sectors of the economy and a qualitative approach used to analyze data. A sample size of 127 respondents from different selected SMEs in the areas of Nateete, Busega and Kyengera. Questionnaires, with closed questions were used to collect data from respondents. From the findings, the quality of financial information in SMEs is average significantly as explained by relevance, faithful representation and understandability of the information. However there are some other external factors such as loan access, technical competence among others which are contributing factors to the going concern of any business enterprise. From the findings of the study, it is recommended that business owners should prepare relevant, understandable, accurate and reliable financial information to enhance decision making and improve performance of small and medium enterprises.