Essays on The Determinants of Investment Readiness of Growth in SMEs Coursework

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The paper 'The Determinants of Investment Readiness of Growth in SMEs" is an outstanding example of finance and accounting coursework. SME’ s growth is a central focus area in strategy, entrepreneurship and organizational research. Firm growth, in general, refers to increase in size. It is normally closely associated with the firm overall success and survival. Growth is used as a simple measure of determining the success of a business as well as the most appropriate indicator of the surviving SME’ s performance. Moreover, growth is an important prediction for the achievement of the other financial goals of the business (Peacock, 2004). Different measures have been used to determine the growth of the firms.

The most frequently used measure for growth changes in the firm’ s turnover. From the interviews conducted by the National Investment Council, it was found that most of the SME’ s have no aspirations for significant growth. It is only about 10% of SME’ s aspire to significant growth. The interviews conducted showed that some of the SME owners were either not willing to, or did not know how to meet the requirements of external investors (National Investment Council Report, 1995). Investment readiness Investment readiness refers to an aspect of growth preparation and quickening in small and medium-sized enterprises (SMEs).

Failure to evaluate investment readiness properly makes the SME unable to realise their prospects. Investment readiness is generally used in the context of raising external equity finance. Investment readiness may be defined using three dimensions. They include equity aversion, investability and presentational failings. Equity aversion is concerned with the entrepreneurs’ attitude towards equity finance. The second dimension is concerned with investability of those businesses that do seek external finance.

The final dimension of investment readiness includes shortcomings in business plans and other written documents aimed at the investors (Beijerse 2000). The issue of finance is very significant to any business or firm regardless of how much readiness they may affirm. Moreover, financial managers need to be able to make viable decisions that can lead to set goal accomplishment. The managers should understand the various aspects of financial management that can help them in their daily operations. Financial management is an activity by which business organizations manage funds and financial activities in order to meet business demands (Beijerse 2000). The Determinants of Investment Readiness of Growth in SMEs There are several factors that determine the investment readiness of growth SME’ s.

The major factor is the business attitude to finance. In all the SME’ s, the financial management concept is very vital and this means that the financial managers have to treat it with much caution. Financial managers are therefore required to change their attitudes towards financing issues and suitable accountability of financial activities should always be a priority to most SMEs so as to be successful in their investments ventures (Beijerse 2000).

The complexity of taxation and accounting systems is another factor that affects most SMEs. This complexity does not encourage investment growth. In addition, such methods do not promote the enhancement of obtaining finance since the systems fail to deal with the risk inherent in most investment opportunities. This is always attributed to the shortage of proper financial information (Beijerse 2000).

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