Title: Financial statement analysis of a network of SMEs: towards measurement of network performance

Authors: Erkki K. Laitinen

Addresses: Department of Accounting and Business Finance, University of Vaasa, P.O. Box 700, Vaasa 65101, Finland

Abstract: This study presents a framework for the financial statement analysis of a network of Small and Medium-sized Enterprises (SMEs). The objective is to make an approach towards a systematic Network Financial Statement Analysis (NFSA). Network is regarded as a virtual entity physically consisted of the resources allocated by the partner firms for the use of the network. The data for the NFSA are drawn from the public financial statements of the partner firms. The proportion of income statement items and balance sheet items is traced by a simple estimation to the resources used by the network and identified by each firm. Virtual network income statement and balance sheet are made up of the allocated proportions. The NFSA is focused on eight measurement objects that are causally related to form a strategic map: resources; growth; concentration; productivity; profitability; mutual flows; risk and value. Several measures for each object are suggested. The NFSA is illustrated by a case of a leader-driven network of SMEs. This study is a part of a multidisciplinary research project on the performance measurement system for SME networks.

Keywords: financial statement analysis; SME networks; financial ratios; growth; profitability; risk; discounted value; SMEs; small and medium sized enterprises; performance measurement; network performance; networking; virtual organisations.

DOI: 10.1504/IJNVO.2006.010951

International Journal of Networking and Virtual Organisations, 2006 Vol.3 No.3, pp.258 - 282

Published online: 20 Sep 2006 *

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