The Impact of SME Financing Policies on Financial Reporting: A Case Study

Authors

DOI:

https://doi.org/10.34190/ecmlg.20.1.3038

Keywords:

Financing Policies, SMEs, Euribor rate, Financial Reporting, Funding Difficulties, Bank Loan

Abstract

Considering financing crucial for the daily survival of entities, it is fundamental to understand the impact of the measures taken by companies regarding the financing obtained. Therefore, the study aims to analyse the impact of financing policies on the financial reporting of entities through an analysis of the financial statements for the year 2021 of three entities. After analysing the results, it is demonstrated that bank loans are the main source of financing used by entities to fund their investments. However, it is noted that the entities under analysis seek external sources of financing, which has significantly increased their financial dependence. Therefore, when compared to their industry sector, these entities have a much lower level of financing via Equity. Regarding the financing costs incurred by their financing policies, it is observed that these are significantly high, mainly in relation to the weight of financing costs in total EBITDA, which impacts the net result of the period. Finally, the high impact of the rise in the Euribor rate on financing costs in 2023 was demonstrated. Thus, it is evident that in relation to other sources of financing, their respective expenses will increase dramatically, potentially greatly affecting the results of the companies.

Author Biographies

Kátia Lemos, Research Centre on Accounting and Taxation - School of Management, IPCA

Kátia Lemos is a Coordinator Professor of financial accounting at the Polytechnic University of Cávado and Ave (IPCA). She received her PhD in Business sciences (Accounting) from Santiago de Compostela University. Author of several articles published in scientific books and journals. Her main research areas are Financial and non-financial reporting.

Paulo Alexandre Neto, Research Centre on Accounting and Taxation (CICF), Polytechnic University of Cávado and Ave, Barcelos, Portugal

Paulo Alexandre Vicêncio Neto has a Master's degree in Accounting and Finance and a degree in Business Management from the Polytechnic Institute of Cávado and Ave. He currently works as an accountant at Born to Organize, Lda. in Braga, Portugal.

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Published

2024-11-13