The Focus of Working Capital Management in UK Small Firms
Posted: 16 Jul 2003
Working capital management routines of a large random simple of small companies in the UK are examined. Considerable variability in the take-up of 11 working capital management routines was detected. Principal components analysis and cluster analysis confirm the identification of four district 'types' of companies with regard to patterns of working capital management. The first three 'types' of companies focused upon cash management, stock or debtors routines, respectively, whilst the fourth 'type' were less likely to take-up any working capital management routines. Influences on the amount and focus of working capital management are discussed. Multinomial logistic regression analysis suggests that the selected independent variables successfully discriminated between the four 'types' of companies. The results suggest that small companies focus only on areas of working capital management where they expect to improve marginal returns. The difficulties of establishing causality are highlighted and implications for academics, policy-makers and practitioners are reported.
JEL Classification: G31, M40, M41, M46
Suggested Citation: Suggested Citation