This study analyses the profitability of small and medium-sized enterprises (SMEs) in Mongolia. SMEs play a crucial role in the Mongolian economy and are considered to be the stimulus of economic development in the country. The present paper investigates the factors that affect the performance of SMEs. It examines the relationship between returns, gender, age, education, bank advances, turnover volume, innovation, management experience, labour, interest rates, customer base, inflation and exchange rate based on data collected from 200 SMEs that have different capital structures. The equation specified profitability as the dependent variable and loans, sales, firm age, firm size and interest rates as independent variables. All data except interest rates which were derived from Central Bank data were gathered from a primary field survey. The conclusion to our study is that there is a strong positive correlation between sales growth, bank advances, business size and profitability.
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