Working Capital and Financial Management Practices in the Small Firm Sector

Abstract

MICHAELJ. PEEL IS A LECTURER IN accountancy and finance at Cardiff Business School, University of Wales, and Nicholas Wilson is Professor of Credit Management at the University of Bradford, England. Very little research has been conducted on the capital budgeting and working capital practices of small firms. The purpose of this paper is to present the results of a preliminary study on the working capital and financial management practices of a sample of small firms located in the north of England. In general, the results of the survey indicated that a relatively high proportion of small firms in the sample claimed to use quantitative capital budgeting and working capital techniques and to review various aspects of their companies' working capital. In addition, the firms which claimed to use the more sophisticated discounted cash flow capital budgeting techniques, or which had been active in terms of reducing stock levels or the debtors' credit period, on average tended to be more active in respect of working capital management practices. It is hoped that the issues raised will stimulate further theoretical and empirical contributions on this neglected and important area of small business research.

Competition and Cooperation in Economics and Business

“…If a small company has the same potential consumers as large enterprises based on the 5Cs criteria, then the small companies will have the opportunity to shorten the billing period of receivables. Peel and Wilson (1996) in Karina (2012) state that the big companies with great liquidity can pay their customers in a timely manner. Damodaran (2001) in Karina (2012) also explains that the volume of inventory can be determined by product availability, cost and the production lines of the company.…”

Analysis of the Risk of Bankruptcy of Tomato Processing Companies Operating in the Interregional Interprofessional Organization “OI Pomodoro da Industria Nord Italia”

“…and to the debt capital market (bank debt, structured finance, syndicated loans, etc. ), as highlighted by various studies [19][20][21][22][23]. Generally speaking, for the financing of investments in property, plants and equipment, the firms of the sector use, in addition to equity capital (E), long-term bank loans and real estate leasing articulated generally in a technical form of mortgages with a guarantee on real estate property and, less frequently, articulated in an unsecured form; in this last case, durations are reduced and often collateral security with a pledge or guarantee of signature is requested and often given by members or credit guarantee consortia.…”

Profitability and Financial Sustainability Analysis in Italian Aquaculture Firms by Application of Economic and Financial Margins

“…NWC quantifies the net resources generated (NWC < 0) or absorbed (NWCt > 0) by the working capital management cycle (Love et al, 2007;Baños-Caballero et al, 2013). It has been shown that the management of working capital is particularly relevant for small firms (Arcelus and Srinivasan, 1993;Saccurato, 1994;Chittenden et al, 2000;Kieschnick et al, 2013), as these enterprises have limited access to the capital market in the medium term and then tend to finance fixed asset investments with debt maturing within twelve months and show rates of default higher than those of large firms (Grablowsky, 1976;Dunn and Cheatham, 1993;Peel and Wilson, 1996;Gray et al, 2006;Molina and Preeve, 2009). This is true even in recent years in Italy (Modina and Pietrovito, 2014;Gordini, 2014).…”

“…and to financial debt (bank debt, structured finance, syndicated loans, etc. ), as shown by several studies (Grablowsky, 1976;Dunn and Cheatham, 1993;Peel and Wilson, 1996;Molina and Preeve, 2009;Woods et al, 2014) highlighting the need for analysis of economic feasibility and financial projects even in the case of aquaculture (Molinos-Senante et al, 2010;Kaiser et al, 2010;Naziri, 2011;Kim and Lipton, 2011;Shamshak, 2011;Hadelan et al, 2012;Kim et al, 2012;Vilela et al, 2013;Emdad Haque et al, 2015).…”