Testing alternative measures of microenterprise profits and net worth

Abstract Using data from 448 microenterprises in Zimbabwe, this paper examines five alternative measures of profits and five alternative measures of net worth. The results show that the single‐question proxies are too difficult for proprietors to answer, whereas the most complex profit measures generate many negative estimates. The best measure of profits, based on three questions, could be answered by all proprietors and it avoids recall problems associated with sales and expenses. Among the net worth proxies, all of the measures are positively correlated. Nonetheless, the proxy based on fixed assets, accounts receivable, debt, and inventory, showed the highest correlation with the full measure of net worth. Copyright © 2001 John Wiley & Sons, Ltd.