Sunday, K.J. (2011). Effective Working Capital Management in Small and Medium Scale Enterprises (SMEs) - International Journal of Business & Management, Vol 6, No.9, Sep 2011.
This study has been undertaken to achieve the following objectives with regard to the management of working capital within SMEs in Nigeria. (1). Evaluate the effect of working capital on the solvency and liquidity of SMEs. (2). Evaluate other methods of debt payments other than payment out of cash. (3). Evaluate or establish an optimal working capital cycle that will encourage payment of debtors using short term sources of funds. (4). Evaluate and propose appropriate working capital management for SME’s in Nigeria.
The research questions addressed by the study included – (1). Do SMEs maintain an appropriate working capital management policy system? (2). Is the failure of most SMEs a result of poor working capital management? (3). Is effective working capital management of value to the survival and solvency of SMEs?
The research analysis comprised of a comparison between 2 different SMEs currently involved in separate industry sectors, namely the manufacturing and service industry. A comparison was then made between the two companies comprising the use of current ratios, in particular the current liquidity ratio and current asset ratios, debtor collection period, and creditor payment period.
The intentions of the author were too identify and highlight the importance of effective working capital management within SMEs, and how failure to adopt a working capital management policy can and often results in business failure. The research also provided insight into other areas of interest relating to the topic. These areas could have been developed further and backed up with supporting data, namely – (1). The problems associated with defining the scale and structure of an SME. (2).The current concept of existing finance structures or lack thereof....