Status of Profitability of MSMEs in a Developing Country: Uganda as a Case Study
AbstractThe study set out to assess the status of profitability of MSMEs in Uganda. A cross sectional descriptive design in which both qualitative and quantitative approaches were used was adopted to study a sample of 371 respondents who were systematically sampled from four districts of Wakiso, Mukono, Kampala and Jinja. Most respondents disagreed (65.7%) that their MSMEs are profitable although some significant number of respondents ( 32.0%) stated that their MSMEs are profitable. Only 2.2% were not decided on the profitability status of their MSMEs. Most MSMEs are not profitable and one of the major problems is poor utilisation of assets and equity to produce return. It is recommended that for profitability to be achieved and consequently growth, the MSMEs should critically examine proposals to purchase assets while recognizing the business they are doing. They should separate for instance business assets and personal assets while making purchasing decisions for business vehicles. Efforts sholud be made such that whenever equity is contributed, return is made thereon. There should not be additional capital from owners that does not earn a return. Instead efficiency is needed with operations to ensure that operations are profitable so as to increase return on capital invested in form of equity funds.
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