Understanding of Basic Financial Statements Among Micro-Entrepreneurs

Abstract

Micro-entrepreneurs play an essential role in local economies, contributing significantly to employment, GDP, and grassroots innovation. However, despite handling daily financial transactions, many lack the financial literacy necessary to interpret or utilize formal financial statements such as the Profit and Loss Account, Balance Sheet, and Cash Flow Statement. This study explores the level of understanding and use of basic financial statements among micro-entrepreneurs in Navi Mumbai, India, emphasizing the impact of financial literacy on decision-making, profitability, and sustainability.
A structured questionnaire was administered to 100 micro-entrepreneurs—primarily kirana store owners, street vendors, and service providers—to assess their awareness, interpretation, and practical application of financial statements. Data were analyzed through descriptive statistics and one-way ANOVA to identify significant relationships between education, experience, and financial-statement awareness.
Findings reveal a substantial financial-literacy gap: 58% of respondents were unaware of basic financial statements, and 47% could not interpret a Profit and Loss Account. The ANOVA results show that education significantly influences financial-statement awareness and decision-making capacity, whereas years of experience do not. The study highlights the importance of targeted financial-literacy interventions, simplified financial tools, and digital training programs to empower micro-entrepreneurs. Enhanced literacy can improve operational efficiency, access to credit, and long-term sustainability of India’s micro-enterprise sector.

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