The Importance of Financial Management in Small Business Economics
Order ID |
53563633773 |
Type |
Essay |
Writer Level |
Masters |
Style |
APA |
Sources/References |
4 |
Perfect Number of Pages to Order |
5-10 Pages |
Description/Paper Instructions
The Importance of Financial Management in Small Business Economics
Small businesses are the backbone of the economy, contributing to job creation and economic growth. However, many small businesses face a significant challenge in managing their finances, which can lead to financial difficulties and even failure. In this essay, we will explore the importance of financial management in small business economics.
Financial management is the process of planning, organizing, directing, and controlling the financial activities of a business. The objective of financial management is to ensure the availability of adequate funds for the smooth running of the business and to maximize the wealth of the owners. Effective financial management is essential for small businesses because they typically have limited resources and are more vulnerable to financial risks than larger companies.
One of the main reasons why financial management is important in small business economics is that it helps in managing cash flow. Cash flow management is critical for small businesses because they often have limited working capital, and any disruptions in cash flow can have a significant impact on their operations. Effective financial management helps small businesses to forecast their cash flows, plan their expenditures, and manage their working capital efficiently.
Another reason why financial management is important in small business economics is that it helps in decision-making. Small businesses often face difficult decisions such as whether to invest in new equipment, hire new staff, or expand their operations. Effective financial management provides small business owners with the necessary information to make informed decisions. Financial statements such as balance sheets, income statements, and cash flow statements provide critical information on the financial health of the business, and can help small business owners to determine the profitability of their operations, identify areas of inefficiency, and make strategic decisions to improve their financial performance.
Furthermore, financial management is essential for small businesses in managing their debt. Small businesses often rely on loans and other forms of debt to finance their operations. Effective financial management helps small businesses to manage their debt levels and avoid defaulting on their obligations. Small businesses need to understand their debt-to-equity ratios and ensure that they have sufficient cash flows to service their debt obligations. Failure to manage debt effectively can lead to bankruptcy and the loss of the business.
In addition, financial management is crucial for small businesses in attracting investors and securing financing. Investors and lenders require accurate financial information to assess the creditworthiness of a business. Effective financial management helps small businesses to prepare financial statements that accurately reflect the financial health of the business. This, in turn, increases the likelihood of securing financing from lenders and attracting investors.
Lastly, financial management is important in small business economics because it helps in measuring the financial performance of the business. Financial performance measures such as return on investment (ROI), profitability ratios, and liquidity ratios provide valuable insights into the financial health of the business. These measures help small business owners to identify areas of strength and weakness in their operations, and make strategic decisions to improve their financial performance.
In conclusion, financial management is essential for small businesses in managing their cash flow, making informed decisions, managing debt, attracting investors, and measuring financial performance. Effective financial management helps small businesses to ensure the availability of adequate funds for the smooth running of the business, maximize the wealth of the owners, and mitigate financial risks. Small business owners should prioritize financial management and seek the advice of financial experts to ensure the long-term success of their operations.
The Importance of Financial Management in Small Business Economics
RUBRIC
QUALITY OF RESPONSE |
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POOR / UNSATISFACTORY |
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Content (worth a maximum of 50% of the total points) |
Zero points: Student failed to submit the final paper. |
20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. |
30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. |
40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. |
50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. |
Use of Sources (worth a maximum of 20% of the total points). |
Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. |
5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. |
10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. |
15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. |
20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. |
Grammar (worth maximum of 20% of total points) |
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5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors |
10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors |
15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. |
20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. |
Structure of the Paper (worth 10% of total points) |
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3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. |
5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper |
7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. |
10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. |
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