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Cash Flow, Profit and Working Capital

In: Small Business Management

Author

Listed:
  • Tim Mazzarol

    (University of Western Australia)

  • Sophie Reboud

    (Burgundy School of Business)

Abstract

While many small businesses start up with only bootstrap financing, it is usually necessary for them to expand their operations and invest in both new capital equipment, employees and marketing or advertising activities. The expansion – even modest expansion – of a small firm can place a strain on the firm’s resources and it is possible for a small business to overtrade and find itself in a financial crisis even though sales are increasing. This chapter explores the importance of understanding the working capital cycle and the need to monitor the break-even sales within the firm while understanding the importance of ‘gross’ rather than ‘net’ profit. It should be noted that the purpose of this book is not to cover financial accounting issues in any detail as this would be beyond its scope. Instead this chapter aims to provide an overview of key financial management concepts considered important to the successful operation of the small business.

Suggested Citation

  • Tim Mazzarol & Sophie Reboud, 2020. "Cash Flow, Profit and Working Capital," Springer Texts in Business and Economics, in: Small Business Management, edition 4, chapter 11, pages 409-450, Springer.
    • Handle: RePEc:spr:sptchp:978-981-13-9509-3_11
    DOI: 10.1007/978-981-13-9509-3_11
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    Cited by:

    1. Sarfraz Hussain & Van Chien Nguyen & Quang Minh Nguyen & Huu Tinh Nguyen & Thu Thuy Nguyen, 2021. "Macroeconomic factors, working capital management, and firm performance—A static and dynamic panel analysis," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-14, December.

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