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The Theoretical Link Between Cash Flow Statement Usage and Decision Making In South African Small, Medium and Micro Enterprises

Author

Listed:
  • Juan-Pierré Bruwer

    (Business Re-Solution, Wellington, 7655, South Africa)

  • Lindiwe Mabesele

    (Cape Town, 8000, South Africa)

  • Vincentia Benting

    (Cape Town, 8000, South Africa)

  • Joël Cloete

    (Cape Town, 8000, South Africa)

  • Chante Jacobs

    (Cape Town, 8000, South Africa)

  • Jade Marais

    (Cape Town, 8000, South Africa)

  • Kgosi-e-tsile Rabolao

    (Cape Town, 8000, South Africa)

  • Marianne Spangenberg

    (Cape Town, 8000, South Africa)

Abstract

South African Small, Medium and Micro Enterprises (SMMEs) are of great importance to the national economy due to their socio-economic value-adding abilities. Despite being responsible for contributing generously to the national Gross Domestic Product (GDP) and providing employment opportunities to more than half of the national workforce, research shows that up to 80% of these business entities fail after being in operation for three years. The latter dispensation is often blamed on unmanaged economic factors and subsequent risks; including that of poor cash flow management. To assess the cash flow situation of a business entity, a cash flow statement is generally used. According to academic literature, South African SMMEs do not make adequate use of cash flow statements which, in turn, may have negative repercussions on business decision making within South African SMMEs. The inadequate use of cash flow statements can be attributable to the isomorphic changes which these business entities undergo, particularly mimetic isomorphism. Therefore, the primary research objective of this study was to determine whether South African SMMEs’ limited utilisation of cash flow statements, as brought about by mimetic isomorphism, has an adverse influence on their business decision making in a theoretical dispensation. This study was non-empirical and qualitative and made use of an online desktop review approach by scrutinising secondary data to, in turn, develop propositions for further empirical testing. From the research conducted it appears that South African SMMEs’ limited utilisation of cash flow statements may adversely influence business decision making within these business entities, at least in a theoretical sense.

Suggested Citation

  • Juan-Pierré Bruwer & Lindiwe Mabesele & Vincentia Benting & Joël Cloete & Chante Jacobs & Jade Marais & Kgosi-e-tsile Rabolao & Marianne Spangenberg, 2021. "The Theoretical Link Between Cash Flow Statement Usage and Decision Making In South African Small, Medium and Micro Enterprises," International Journal of Business Research and Management (IJBRM), Computer Science Journals (CSC Journals), vol. 12(4), pages 191-204, August.
  • Handle: RePEc:aml:intbrm:v:12:y:2021:i:4:p:191-204
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    SMMEs; South Africa; Business Decision Making; Cash Flow Statement; Cash Flow.;
    All these keywords.

    JEL classification:

    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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