A Proposed Capital Budgeting Technique For Liquidity Constrained Small Businesses
Although the ad vantages of capital budgeting models using discounted cash flaws are well known, small businesses continue to rely on non-discounted techniques in making capital budgeting decisions. This paper analyzes the financial environment in which small businesses operate that makes traditional capital budgeting models inappropriate. A capital budgeting technique is developed that is sensitive to the needs of small businesses and also meets the three-fold criteria for capital budgeting methods.
1. Aggarwal, Raj (1980), "Corporate Use of Sophisticated Capital Budgeting Techniques: A Strategic Perspective and A Critique of Survey Results,"Interfaces, 10(April), 31-34.
2. Bhandari, Shyam B. (1986), "Discounted Payback: A Cri terion for Capital Investment Decisions," Journal of Small Business Management, 24 (April), 17-22.
3. Brealey, Richard and Stewart Myers, Principles of Corporate Finance, Second Edition, McGraw-Hill, 1984, 412-415.
4. Brigham, Eugene F., Fundamentals of Financial Management, Fif th Edi lion, Dryden Press, 1990, 354-366.
5. 1982 Characteristics of Business Owners, U.S. Department of Commerce, Bureau of the Census.
6. Cook, Thomas J. and Ronald J. Rizzuto (1989), "Capital Budgeting Practices for R&D: A Survey and Analysis of Business Week's R&D Scoreboard," The Engineering Economist, 34 (Summer), 291-303.
7. Fremgen, James M. (1973), "Capital Budgeting Practices: A Survey," Management Accounting, May, 25-39.
8. Gilman, Lawrence J. and John R. Forrester (1977), "A Survey of Capital Budgeting Techniques Used by Major U.S. Firms," Financial Management, 6 (Fall), 66-71.
9. Grablowsky, Bernie J. and William L. Bums (1980), "The Application of Capital Allocation Techniques by Small Business," Journal of Small Business Management, 18 Quly), 50-58.
10. Henderson, James W ., Obtaining Venture Financing: Principles and Practices, Lexington Books, 1988, 231-299.
11. Hendricks, James A. (1983), "Capital Budgeting Practices Including Inflation Ad just ments: A Survey," Managerial Planning, 31(January/ February), 22-28.
12. Jones, Colin J. (1986), "Financial Planning and Control Practices in U.K. Companies: A Longitudinal Study," Journal of Business, Finance, and Accounting, 13 (Summer),
13. Kim, Suk H. and Edward J. Farragher (1981), "Current Capital Budgeting Practices,"
Management Accounting, 62 Uune), 26-30.
14. Klammer, Thomas (1972), "Empirical Evidence of the Adoption of Sophisticated Capital Budgeting Techniques," Journal of Business, Uuly), 387-397.45
15. and Michael C. Walker (1984), ''The Continuing Increase in the Use of Sophisticated Capital Budgeting Techniques,"California Management Review, 27 (Fall), 137-148.
16. Levy, Haim and Marshall Sama! (1986), Capital Investment and Financial Decisions,
Englewood Cliffs, New Jersey: Prentice Hall, 2-215.
17. Oblak, David J. and Roy J. Helm (1980), "Survey and Analysis of Capital Budgeting Methods Used by Multinationals,''Financial Management, Winter, 37-41.
18. Pattillo, Donald M. (1981), "Capital Investment Practices of Small Manufacturers: American Versus Multinational," Journal of Small Business M anagement, 19 (April), 29-36.
19. Runyon, L.R. (1983), "Capital Expenditure Decision Making in Small Firms,"Journal of Business Research, 11(3), 389-399.
20. Schall, Lawrence D., Gary L.Sundemand William R. Geijsbeek,Jr. (1978), "Survey and Analysis of Capital Budgeting Methods,'' The Journal of Finance, 33 (March), 281-287.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.