The Effect of Working Capital and Investment Decisions on Small Firm Financial Sustainability and Growth

Krishna Reddy, Tarun Kapoor, Vishweshwar Mensumane, Saroj Kanta Biswal, Richa Garg, Preeti Khatri, Rani J and Hemal Thakker

Management (Montevideo), 2025, vol. 3, 173

Abstract: Introduction: The industry of small and medium-sized enterprises (SMEs) has a key impact on the economy by creating jobs, encouraging innovation, and facilitating expansion. Many SMEs have issues with stability because their working capital is not utilized properly, and investment approaches are not well-structured. This research aims to analyze the effects of working capital components and investment decisions on the ability of small firms to grow and remain sustainable. Method: Data for analysis were obtained from 230 SMEs in the manufacturing, services, and retail sectors. Financial practices and characteristics of the firms were summarized using descriptive statistics. Result: Using multiple linear regression analysis, it was found that accounts receivable, inventory, and investment decisions were key factors in determining if a corporate entity can remain sustainable and achieve growth in revenue and assets. Conclusion: The results highlight that managing finances and planning investments for the short to medium term are important for the stability and results of SMEs. The research supports introducing financial literacy and strengthening the capacity to assist small business owners when making decisions.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:dbk:manage:v:3:y:2025:i::p:173:id:1062486agma2025173

DOI: 10.62486/agma2025173

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