A Proposed Capital Budgeting Technique For Liquidity Constrained Small Businesses


  • John B. White Georgia Southern College
  • Morgan P. Miles Georgia Southern College


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.



Download data is not yet available.



Aggarwal, Raj (1980), "Corporate Use of Sophisticated Capital Budgeting Techniques: A Strategic Perspective and A Critique of Survey Results,"Interfaces, 10(April), 31-34.

Bhandari, Shyam B. (1986), "Discounted Payback: A Cri terion for Capital Investment Decisions," Journal of Small Business Management, 24 (April), 17-22.

Brealey, Richard and Stewart Myers, Principles of Corporate Finance, Second Edition, McGraw-Hill, 1984, 412-415.

Brigham, Eugene F., Fundamentals of Financial Management, Fif th Edi lion, Dryden Press, 1990, 354-366.

1982 Characteristics of Business Owners, U.S. Department of Commerce, Bureau of the Census.

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.

Fremgen, James M. (1973), "Capital Budgeting Practices: A Survey," Management Accounting, May, 25-39.

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.

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.

Henderson, James W ., Obtaining Venture Financing: Principles and Practices, Lexington Books, 1988, 231-299.

Hendricks, James A. (1983), "Capital Budgeting Practices Including Inflation Ad just­ ments: A Survey," Managerial Planning, 31(January/ February), 22-28.

Jones, Colin J. (1986), "Financial Planning and Control Practices in U.K. Companies: A Longitudinal Study," Journal of Business, Finance, and Accounting, 13 (Summer),


Kim, Suk H. and Edward J. Farragher (1981), "Current Capital Budgeting Practices,"

Management Accounting, 62 Uune), 26-30.

Klammer, Thomas (1972), "Empirical Evidence of the Adoption of Sophisticated Capital Budgeting Techniques," Journal of Business, Uuly), 387-397.45

and Michael C. Walker (1984), ''The Continuing Increase in the Use of Sophisticated Capital Budgeting Techniques,"California Management Review, 27 (Fall), 137-148.

Levy, Haim and Marshall Sama! (1986), Capital Investment and Financial Decisions,

Englewood Cliffs, New Jersey: Prentice Hall, 2-215.

Oblak, David J. and Roy J. Helm (1980), "Survey and Analysis of Capital Budgeting Methods Used by Multinationals,''Financial Management, Winter, 37-41.

Pattillo, Donald M. (1981), "Capital Investment Practices of Small Manufacturers: American Versus Multinational," Journal of Small Business M anagement, 19 (April), 29-36.

Runyon, L.R. (1983), "Capital Expenditure Decision Making in Small Firms,"Journal of Business Research, 11(3), 389-399.

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.



How to Cite

White, J. B., & Miles, M. P. (1990). A Proposed Capital Budgeting Technique For Liquidity Constrained Small Businesses. Journal of Small Business Strategy, 1(2), 36-46. Retrieved from https://libjournals.mtsu.edu/index.php/jsbs/article/view/223