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Small and Medium Enterprises Accounts Receivable Management With Value of Liquidity in View

Finansowe Aspekty Funkcjonowania Malych i Srednich Przedsiebiorstw, pp. 357-369, 2003

15 Pages Posted: 14 Jul 2007  

Grzegorz Michalski

Uniwersytet Ekonomiczny we Wrocławiu - Faculty of Engineering and Economics

Abstract

The basic financial purpose of an small and medium enterprise is maximization of its value. Accounts receivable management should also contribute to realization of this fundamental aim. The key theme of this paper is accounts receivable management with value of liquidity in view. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit-based models could be lacking in what relates to another aim (i.e., maximization of enterprise value). The small and medium enterprise value maximization strategy is executed with a focus on risk and uncertainty. An increase in the level of accounts receivables in a firm increases both net working capital and the costs of holding and managing accounts receivables. Both of these decrease the value of the firm, but a liberal policy in accounts receivable coupled with the portfolio management approach could increase the value. Efforts to assign ways to manage these risks were also undertaken; among them, special attention was paid to adapting assumptions from value of liquidity theory as well as gauging the potential effect on the firm value.

Notes: Downloadable document is in Polish.

Keywords: Value of liquidity, Value based management, Liquidity measures, Demand for Liquidity, Liquidity balances, Risk, Uncertainty, Real Options, Option Value of Liquidity, Short-Term Financial Management, Working Capital Management

JEL Classification: G39, G32, G11, M11, D81, O16, P33, P34

Suggested Citation

Michalski, Grzegorz, Small and Medium Enterprises Accounts Receivable Management With Value of Liquidity in View. Available at SSRN: https://ssrn.com/abstract=1000669

Grzegorz Michalski (Contact Author)

Uniwersytet Ekonomiczny we Wrocławiu - Faculty of Engineering and Economics ( email )

ul. Komandorska 118-120
Wroclaw, 53-345
Poland

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