Determinants of Financial Performance Evaluation for Msmes with Reference to Manufacturing Sector in India
“Micro, Small, and Medium Enterprises” (MSMEs) play a pivotal role in the Indian economy, contributing significantly to industrial output, employment, and exports. Yet, the FP is typically limited not only by the effects of traditional financial factors but also by the effects of other, yet poorly studied, nonfinancial determinants. With this aim, this research attempts to bridge this gap and study the influence of “Financial Literacy” (FL), digital accounting practices, and market competition on the economic performance of MSMEs in India's MS. “Structural Equation Modelling” (SEM) is used on data collected using a structured questionnaire containing 384 MSMEs to study the interaction between these nonfinancial factors and “Financial Performance” (FP) indicators such as solvency, liquidity, and profitability. Key findings reveal that FL plays a part in changing the capability of MSME owners to build financial decisions and subsequently progress financial outcomes. Additionally, digital accounting tools are positively connected with finance and business management, operational efficiency, and transparency. The other important finding of the study is that market competition also influences FP by forcing firms to innovate, implement best practices, and optimize their operations. The results imply that financial records, as detailed by traditional accounts, are essential, but there are also nonfinancial variables that include digital tools and financial knowledge, which are equally important in shaping long-term MSME success. The contribution of the research in this paper is its wide-ranging analysis of the nonfinancial determinants of MSME performance and implications for the policymakers, managers, and financial institutions on how to improve financial management and promote the sustainable growth of the MSMEs.