BCOM Research Projects

Permanent URI for this community

http://hdl.handle.net/11071/12223

Browse

Browsing BCOM Research Projects by Author "Mahat, S. A."

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    Assessing the impact of investment decisions on profitability of Small and Medium scale Enterprises in Nairobi, Kenya
    (Strathmore University, 2025) Mahat, S. A.
    This study investigates the impact of various investment decisions-capital expenditure, information technology (IT), research and development (R&D), training and education and working capital management-on the profitability of Small and Medium Enterprises (SMEs) in Nairobi, Kenya. The study was done in order to determine the investment decisions that can yield the highest profitability for SMEs. This is due to the fact that SMEs are financially constrained according to (Gveroski, G., & Jankuloska, M. (2017) and as a result, the investment decisions that yield the highest profitability should be considered. Employing a descriptive research design, data was collected from a sample of 70 SMEs across multiple sectors using stratified sampling. Quantitative methods were utilized, including regression and descriptive statistical analysis, to explore the relationship between these investment decisions and profitability, measured by return on investment (ROI). The findings reveal that IT investments generate the highest average ROI (77.8%), underscoring their critical role in enhancing operational efficiency and market competitiveness. Capital expenditure follows with a significant average ROI of 41.5%, demonstrating its importance in long-term asset growth. R&D, along with education and training, yields an average ROI of 51.2%, reflecting its value in driving innovation and workforce capability. Working capital management also positively influences profitability, albeit with varied outcomes depending on the firm's efficiency in handling short-term assets and liabilities. The results suggest that strategic investment decisions are pivotal in improving SME profitability. These insights are valuable for SME managers, policymakers, and investors aiming to enhance financial performance and stimulate economic growth. The study highlights the need for SMEs to adopt data-driven approaches when selecting investment strategies, ensuring optimal resource allocation for sustained profitability. The uniqueness of the study stems from the fact that unlike many studies that focus on a single type of investment, this research examines the combined impact of capital expenditure, IT investments, R&D, education and training, and working capital management. This multifaceted approach provides a more comprehensive understanding of how various investment strategies contribute to SME profitability.