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WHY INVESTORS SHUN SMALL FIRMS AND INVEST SOMEWHERE

Uploaded by credulous on Sep 18, 2017

INTRODUCTION

Small businesses are the backbone of many economies across the globe. The major challenge is, however, to lure the investors among these small businesses (Buckley 1998:87; Kinunda-Rutashobya & Olomi 1999:7).furthermore small businesses are failed to survive as a backbone of the economic within our country because the absence of investors to inject their capital within these small entities in Zimbabwe because of other reasons including political, economic situation of Zimbabwe, cash flow management , poor planning and management education (training), dominance of management by family members and imperfect and incomplete information about small firms background. These reasons justify why these investors from both local and abroad decided to invest in large firms within our country or outside therefore that’s why some of the businesses that were started in the early 1990s are no longer in existence and also that are not growing beyond the survivalist stage. The high failure rate can be partially attributed to the lack of investors that the small, Medium and micro-enterprises (SMMEs) experience.

Cash flow management

There has been some research into the matter of why small businesses fail. Dickey (1994: 197) reports that small businesses fail because more often than not cash flow is not properly managed. The point is made that when a business starts or expands; more money needs to be invested for a while and gives the business owner very little in return, therefore some investors they take how the owners of small business manage cash flow into consideration before they take a wise decision to invest their money.

According to Hall (1995: 19) van Aardt et al. (2002: 252-3) argue that making and receiving payments is at the heart of a business, so it is essential to have a system that is optimised to maximise cash flow and manage information accurately. There are various reasons why businesses experience cash-flow problems. The above authors mention four factors that affect small businesses to have external sources of finance that are investors: slow-moving or excessive stock (which gives rise to poor stock or inventory management); too generous credit terms; cash wasted on unprofitable products and services; and unnecessary expenditure (money spent on buildings, houses, machines, luxury cars or their salaries). According to Longenecker et al. (2003: 298), cash-flow problems are a frequently expressed concern of small business owners. They believe that if a small business owner does not understand how decisions impact cash...

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Uploaded by:   credulous

Date:   09/18/2017

Category:   Business

Length:   11 pages (2,394 words)

Views:   252

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