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Exploring the Effects of Financial Knowledge on Better Decision-Making in SMEs

Author

Listed:
  • Vicente González-Prida

    (Department of Industrial Management I, University of Seville, 41092 Seville, Spain)

  • Diana Pariona-Amaya

    (Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru)

  • Juan Manuel Sánchez-Soto

    (Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru)

  • Sonia Luz Barzola-Inga

    (Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru)

  • Uldarico Aguado-Riveros

    (Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru)

  • Fabricio Miguel Moreno-Menéndez

    (Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru)

  • Mark David Villar-Aranda

    (Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru)

Abstract

The knowledge on financial management highly matters as it assists the micro-entrepreneurs in the making of right and sustainable business decisions. This research seeks to examine the effects of financial literacy on microenterprise decision-making in order to improve rational decision-making in financial management. A structured questionnaire with Likert-scaled options was used to measure micro-entrepreneurs’ financial decision-making capacity in terms of information processing and decision-making. They demonstrate a favorable relationship between financial education and rationality, which refers to micro-entrepreneurs’ capacity to select from a range of acceptable options. Based on the findings presented in this research, it is suggested that greater efforts should be paid to the integration of financial literacy within any form of entrepreneurial training targeting improvement in sustainability dimensions and qualities of decisions made by micro-entrepreneurs. Through increased financial knowledge, micro-entrepreneurs can manage financial problems effectively and thereby support the growth of sustainable microenterprises. Moreover, such observations suggest that all future policies must focus on and incorporate financial literacy as the defining strategy towards the improvement of the microenterprise sector and, therefore, economic growth.

Suggested Citation

  • Vicente González-Prida & Diana Pariona-Amaya & Juan Manuel Sánchez-Soto & Sonia Luz Barzola-Inga & Uldarico Aguado-Riveros & Fabricio Miguel Moreno-Menéndez & Mark David Villar-Aranda, 2025. "Exploring the Effects of Financial Knowledge on Better Decision-Making in SMEs," Administrative Sciences, MDPI, vol. 15(1), pages 1-25, January.
    • Handle: RePEc:gam:jadmsc:v:15:y:2025:i:1:p:24-:d:1565057
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    References listed on IDEAS

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    1. Happiness Ozioma Obi-Anike & Ogohi Cross Daniel & Ifeoma Joanes Onodugo & Ikechukwu Joseph Attamah & Benedict Ogbemudia Imhanrenialena, 2023. "The Role of Financial Information Literacy in Strategic Decision-Making Effectiveness and Sustainable Performance among Agribusiness Entrepreneurs in Nigeria," Sustainability, MDPI, vol. 15(13), pages 1-17, July.
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    2. Arifin Arifin & Misrah Misrah & Sitti Mujahida & Herminawaty Abubakar, 2025. "Mastery of financial accounting and market orientation: Driving competitive advantage in Indonesian SMEs," Asian Management and Business Review, Master of Management, Department of Management, Faculty of Business and Economics Universitas Islam Indonesia, vol. 5(2), pages 279-296.

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