Small Business Financial Management

As a part of this introduction, a problem statement, a reflection on the importance of the problem, and limitations to its study are presented. Following the introduction, a brief review of the literature relevant to the problem to be studied, a statement of the research methodology which will be employed in the conduct of the proposed study, and a plan for the presentation of the research results are presented.

The factors which influence the untimate success of any business enterpriselarge, medium, or smallare both numerous and varied. Ineffective financial management, however, is implicated in an unusually high proportion of small business failures. Thus, a decision was made by the researcher to emphasize this group of factors in the research to be performed for the proposed study.

The importance of small business activity in a market economy may be appreciated by considering the role of such activity in the economy of the United States. Applying the Nappi and Vora (1980) definition of small business (either

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systems is not the planning criterion upon which the level of working capital is based, it is a factor which is capable of contributing to the deterioration of a firm's working capital position; thereby threatening theliquidity position of the firm. 6 Liquidity The difference between a firm's current assets and its current liabilities is its working capital. Accounts receiv able are a component of current assets. The conversion, through the collections process, of receivables to cash does not change (all other factors remaining unchanged) either the current asset position, or the working capital position of a firm; it simply changes the componentlocation of the current asset. In most corporate situations, however, all other factors do not remain unchanged. On the current liabilities side of the equation, in most firms, new liabilities are being created almost continuously, or spontaneously (Joy, 1987). Thus, if the working capital position of the firm is to be maintained, the most mature of the current liabilities must almost continu ously be paid. The conversion of receivables to cash contri butes significantly to ability of a firm to pay its current liabilities. If a firm does not pay its current liabi
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Approximate Word count = 2793
Approximate Pages = 11 (250 words per page)

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