DEPARTMENT OF ACCOUNTING AND FINANCE, SCHOOL OF BUSINESS AND ECONOMICS, GRADUATE STUDIES ARBA MINCH A UNIVERSITYIN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OFMASTER OF SCIENCE IN ACCOUNTING ANDFINANCE

Abstract

The overall aim of this research was to identify the factors that affecting the financial performances of Micro and Small Enterprises, in the Tercha Town Administration. The study has been designed as a cross-sectional survey, and a mixed research design was implemented. Both quantitative and qualitative data was collected from primary and secondary data sources. The collected data was analyzed using both descriptive and inferential statistics by using Microsoft Office Excel 2010 and Stata software. The Micro and small enterprises were employed to measure the financial performance of MSEs in terms of Ethiopian Birr. The mean value of annual profits in the study area was 64,657.36 ETB, and it ranges between 5,250 and 310,000 ETB. The multiple regression models were used to identify factors affecting the financial performance of Micro and small enterprises. Out of the ten variables entered into the model, four were statistically significant: sex, age, family size, and education level, are statistically significant and positively affecting MSE performance. The major challenges affecting MSE performance are inadequate infrastructure, a lack of selling and displaying places, a lack of working capital, poor market linkages and information, poor accounting and record keeping, and material cost fluctuation. Opportunities include access to labor, market access and availability, governmental support and follow-up, training for beginners, and loan facilities. So, the local governments should be making proper training and awareness-creation activities to make the MSEs' effective business operations perform well.