Business, Management and Accounting
8 years ago

Small businesses face bankruptcy risk due to cash flow mismanagement.

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Journal of business & entrepreneurship
Working Capital Financing and Cash Flow in the Small Business
Leo R. Cheatham, J. Paul Dunn, Carole Cheatham

Paper Summary

Cash flow problems can lead profitable small businesses to bankruptcy if they can't pay their bills. The cash conversion cycle helps estimate the cash needed for current assets financing. Profit doesn't always mean enough cash flow. Large corporations realized this in the 1970s when high interest rates showed that cash, not profits, is crucial for survival and growth. Financial managers now focus on managing cash flow to reduce the amount needed and speed up the cash conversion cycle.

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