The problem investigated through this research concerned the development of capitalization sources for independent auto mobile dealers. For purposes of this research, independent automobile dealers were defined as those automobile and truck retailing organizations which were not affiliated with an auto mobile manufacturer through franchising contracts.
Literature related to the problem investigated is reviewed in this chapter. This review is presented in two major discus sions. The first discussion considers the capital requirements of independent automobile dealers, while the second considers the characteristics of various sources of capital.
CAPITAL REQUIREMENTS: INDEPENDENT AUTPOMOBILE DEALERS
Capital requirements exist for independent automobile dealers in two general contexts. The first requirement area concerns working capital, while the second requirement area involves the marketing activities of these organizations. Cap ital requirements in these two general contexts are reviewed separately. Working capital requirements are considered first, and this discussion is followed by a review of capital sources.
Working capital consists of the short term financial requirements of business enterprises (Gitman, Joehnk, & Pinches, 1985). Working capital is defined as the difference between current assets and current liabilities, where the designation "current" implies maturity dates of one year or less (Brigham, 1987). In a very real sense, therefore, working capital management within a firm is liquidity management, for it is a measure of the short term liquidity of the firm.
Although working capital, by definition, is a short term measurement, the amount of working capital available to a firm is largely financed from long term sources equity investments, retained earnings, or long term liabilities (Hausman, & San chez Bell, 1975). Working capital requirements which cannot be financed from long term sourc...