Abstract

The goal of the business should reflect its efforts to achieve a certain future state. Classical economic theories emphasize the achievement of profit as a fundamental goal of business. Modern theories consider gaining profit as one of the basic motivating factors. In practice, we distinguish several profit categories that are described in our contribution. The effort of businesses is detection of indicators that help enterprises to generate profit. In our contribution, we focused on the analysis of the profitability of small and medium-sized enterprises as well as on the identification of indicators that significantly influence the rate of profit. In our research we worked with a sample of 9,500 Slovak small and medium-sized enterprises. It was primarily a limited liability company with domestic ownership. We mainly focused on this type of businesses because many authors emphasize the irreplaceable role of small and medium-sized enterprises in countries’ economies. Small and medium-sized enterprises play a very important role not only in Slovakia but also in the global economy. The significantly influence the creation of hundreds of jobs, regional development or a high percentage of GDP. Approximately 98% of enterprises in the Slovak Republic fall into the category of small and medium-sized enterprises. For their functioning, it is very important to have the capital that they inevitably need, either for the start of business as such, for development. However, these type of businesses does not always have easy access to financing, especially in the case of bank loan financing. Profit for SMEs is a very important internal source of funding. The aim of our paper is profit analysis and identification of the main profit-taking indicators. The analysis of the profitability was conducted by using methods of descriptive statistics. Based on the studied literature, we selected individual profit categories as basic indicators of profitability as well as selected indicators of profitability that are defined below. Pearson’s correlation coefficient and the one-way ANOVA were used to examine the relationship between the selected indicators and achieved profit. Graphs and charts are used to clear the processing of the results of our research.

Keywords: ANOVA, cash management, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, net operating profit after tax, earnings before interest after taxes, Pearson correlation coefficient

JEL Classification: D25, M21, G21, G23, G24.

Cite as: Siekelova, A., Kovacova, M., Adamko, P. & Stehel, V. (2019). Profit management as an instrument for SMEs developing: the case for Slovakia. Marketing and Management of Innovations, 3, 285-296. https://doi.org/10.21272/mmi.2019.3-22

This work is licensed under a Creative Commons Attribution 4.0 International License

References

1. Act no. 100/1995 on State aid to small and medium-sized enterprises as amended
2. Agarwal, Nipun, Paul Kwan, and David Paul (2018). Merger and Acquisition Pricing Using Agent Based Modelling.  Economics, Management, and Financial Markets (13): 84–99.
3. Al Sayed. A. R. M, Isa, Z. and Kun, S. S. (2018). Outliers Detection Methods in Panel Data Regression: An Application to Environment Science. International Journal of Ecological Economics & Statistics. 39(1): 73-86.
4. Balcerzak, A.P., Kliestik, T., Streimikiene, D. and Smrcka, L. (2018). Non-Parametric Approach to Measuring the Efficiency of Banking Sectors in European Union Countries. Acta Polytechnica Hungarica, (14): 51-70.
5. Cohen, J. (2003). Applied multile regression/ correlation analysis for the behavioral science. NY: Lawrence Erlbaum Associates.
6. Commercial Code no. 513/1991 Coll. as amended
7. Cornille, D., Rycx, F. and Tojerow, I. (2019). Heterogeneous effects of credit constraints on SMEs’ employment: Evidence from the European sovereign debt crisis. Journal of Financial Stability. (41): 1-13.
8. Dvorsky, J., Popp. J., Virglerova, Z., Kovacs, S. and Olah, J. (2018). Assessing the importance of market risk and its sources in the SME of the Visegrad Group and Serbia. Advances in Decision Sciences. 22: 1-25.
9. Emerling, I., Wojcik-Jurkiewicz, M. (2018). The risk associated with the replacement of traditional budget with performance budgeting in the public finance sector management. Ekonomicko-manazerske spektrum, (12), 55-63.
10. European Commission Recommendation No. 2003/361/ EC
11. Gaganis, Ch., Pasiouras, F. and Voulgari, F. (2019). Culture, business environment and SMEs’ profitability: Evidence from European Countries. Economic Modelling. (78): 275-292.
12. Grombirova, K. and Kubickova, D. (2015). WACC and factors influenced its level in conditions of SMEs in Czech Republic. 10th International Scientific Conference. 299-307.
13. Hahnel, R. (2019). The Question of Profits. Review of Radical Political Economics. (51)1: 129-146.
14. Intrum Justitia (2016). European Payment Report Index.
15. Intrum Justitia (2017). European Payment Report Index.
16. Intrum Justitia (2018). European Payment Report Index.
17. Jamali, D., Lund-Thomsen, P. and Jeppesen, S. (2017). SMEs and CSR in Developing Countries. Business & Society. (56)1: 11-22.
18. Jim Yeub, K. and Myungkyu, S. (2019). Does higher firm profit dispersion reflect greater micro uncertainty? Economics Letters. (176): 35-38.
19. Kollar, B., Weissova, I. and Siekelova, A. (2015). Comparative analysis of theoretical aspects in credit risk models. International Conference on Applied Economics (ICOAE). Kazan, Russia. 
20. Limaj, E. and Bernroider, E. W. N. (2019). The roles of absorptive capacity and cultural balance for exploratory and exploitative innovation in SMEs. Journal of Business Research. (94): 137-153.
21. Menger, C. (2016). The Social Theories of Classical Political Economy and Modern Economic Policy. Econ Journal Watch. (13)3: 473-489.
22. Nadanyiova, M. (2014). Japanese management and its practice in company branch based in Slovakia. 8th International Scientific Conference on Business and Management Location: Vilnius, Lithuania: 546-554.
23. O’Hagan, A., Stevenson, M. and Madan, J. (2007). Monte Carlo probabilistic sensitivity analysis for patient level simulation models: Efficient estimation of mean and variance using ANOVA. Health Economics. 16(10): 1009-1023.
24. Olah, J., Kovacs, S., Virglerova, Z., Lakner, Z. and Popp, J. (2019). Analysis and Comparison of Economic and Financial Risk Sources in SMEs of the Visegrad Group and Serbia. Sustainability, 11: 1-19.
25. Pawliczek, A. and Zimmermannova, J. (2018). Evaluation Of The Economic Indicators Of A Company-Prosumer Using Photovoltaics. Forum Scientiae Oeconomia. 6(4): 51-64.
26. Rimarcik, M. (2007). Statistika pre prax. Vydané vlastným nákladom, 2007. 
27. Robson, G. (2019). To profit maximize, or not to profit maximize: for firms, this is a valid question. Economics and Philosophy. (35)2: 307-320.
28. Sharif, B., Wong, H., Anis, A. H. et al. (2017). A Practical ANOVA Approach for Uncertainty Analysis in Population-Based Disease Microsimulation Models. Value in Health. (20)4: 710-717
29. Sion, G. (2018). How Artificial Intelligence Is Transforming the Economy. Will Cognitively Enhanced Machines Decrease and Eliminate Tasks from Human Workers through Automation? Journal of Self-Governance and Management Economics. (6): 31–36.
30. Slovak Business Agency. 2017. Report on the state of the SMEs.
31. Soto-Acosta, P., Popa, S. and Palacios-Marques, D. (2016). E-business, organizational innovation and firm performance in manufacturing smes: an empirical study in Spain. Technological and Economic Development of Economy. (22)6: 885-904.
32. Stefanikova, L. and Masarova, G. (2014). Competitive Intelligence in Conditions of SMEs. 2nd International Conference on Management Innovation and Business Innovation (ICMIBI 2014). Bangkok, Thailand. 
33. Stoklasova, R. (2018). Econometric Analysis Of SMEs In Eurozone. Forum Scientiae Oeconomia. 6(1): 19-29.
34. Strazovska, H., Strazovska, L. and Pavlik, A. (2007). Male a stredne podniky. Bratislava: Sprint.
35. Valaskova, K., Kliestik, T., Svabova, L. and Adamko, P. (2018). Financial Risk Measurement and Prediction Modelling for Sustainable Development of Business Entities Using Regression Analysis. Sustainability. (10). 
36. Valaskova, K., Bartosova, V. and Kubala, P. (2019). Behavioural Aspects of the Financial Decision-Making. Organizacija, (52): 22-32.
37. Van Den Berg, M., Van Marrewijk, Ch. and Tamminen, S. (2018). Trade, productivity and profitability: On profit levels and profit margins. World Economy. (41)8: 2149-2174.
38. Zhang, J., Kong, D. and Wu, J. (2018). Doing Good Business by Hiring Directors with Foreign Experience. Journal of Business Ethics. (153)3: 859-876.