The definition of SME changes from country to country. Among all this we have to explain the SME and the important in this will make as to understand clearly why we doing this search? Coming to the first part SME of small and medium business used by the south west venture fund is a business or company that carrying employee that depend on the size of business. For example, those businesses with less then 50 employee called them as "small" and those businesses with 250 as "medium". Explaining all this SME also provide information depend on EU (European union) and local authorities that what they offering to support the small firms size, to promote entrepreneurships so that people and in particular younger's ones seriously consider becoming an commercial as job option, to give important to the business for their contribution to Europe's benefit, jobs, innovation and competitiveness, All this related to the SME. Now coming to the second part here our assignment let as know the important of SME. Today, government world wide mentions the necessary and important of SME, important for economic growth and important of public organization. SME has account for new project of employment 0ver 95% and 60 to 70 percent was producing a large share of new jobs found in OECD (Organization for Economic Co-operation and Development) economies. As new discover of globalizations and technology , changes happened in economic of scale in many activities, which mean small firms change and become more improved much better from past. The important and the main functions of SME make the idea of this search or report clear so that we can explain why European country facing problems in small firms. After gathering and analysis information, small firms shutting down and this because of problems or reasons we can mention one of these problems profitability they not making that amount out, of 2 0r 3 years this business will fall down. Comparing this, our country not facing not any kind of any problems and also in Oman small firms has arise and has growing fast
Chapter 2
Literature review
Capital formation
What is capital formation?
"Is a data perception used in accounts system, econometrics and macroeconomics. It is also used in corporate business accounts. It is rule of net additions to the capital stock in an accounting period, or, important of results by which the total capital stock increased among an accounting period; though it may infrequently also submit to the total stock of capital produced, or to the growth of this total stock" .
Mark, A (1999) Small firm's owners always spent most time developing money and refining product or idea. However, if businesses owner is so lack to sufficient capital to invest in the facilities or for people needed, the business may fail before to get its products into the market place. Another situation show the importance of sufficient capital involves a more mature but quickly growing company. Such a small firms, likely started out of personal resources of the owner, has support its growth only by increasing its profits. In such a case, the company’s growth is limited by its sales. A problem arises; however, if the small firms product becomes for example become burning, orders begin coming faster than expected. The small manufacturing lacks the capital required to support the production of the stock to load the orders. These fast growing firms can consume large amounts of capital as they try to balance at the same time normal operations and growth, requiring investments in new equipment and facilities. An undercapitalized company in this situation can fail even though it was about to come to terms with success. These factors are important to small business. It can mean the different between successes and week .
Capital formation
Economic and Finance (2009) Obtaining capital is one of the most problems that small businesses face. According to this author he mentions some problem that small business face when family helps owner to start the business but not every time that can they the help because of capital that will not be enough or the reasons that when family earn owner money to start business how the now if business grow how they trust the owner does owner will pay back again. Many small businesses owners face problem to enter the business the reasons that is the sufficient center to maintain the capital? Because the risk, banks need help in sharing the risk posed by making extreme. United of state present 'Obama' recently describe for banks to increase loans and give more fund, but this is typically dose not attend to the real issues facing small business. Our results that show different comparing between European countries in our country "Oman" in this because lack of capital owner form other state find problem. But here in Oman we ask many owners of small firms and the answer was so clear nothing of this crisis happening her owners have money to enable them start business easily, and also the not taking any mortgage from bank.
Working capital
Overall approach
"Working capital management is important to the small business. Perhaps this will lead the long term capital market to rely more seriously on owner financing, for example credit and short term banks loans to finance their needed investment in cash, accounts receivable and inventory" (Chittenden et al, 1998; saccurato, 1994).
Bush, S (2008) The major factor which should be worry about is obtaining working capital and business in cash based on credit card. Business owners must look out for substantial benefit which will accrue to their business by effectively to organize the credit card factoring and processing, in this happen when benefit determination are increasing. One of most important commercial financing needs for any business is ensuring those short-term cash requirements are successfully met. However, as noted below there are a number of potential problems to be anticipated and avoided when businesses use credit card processing to seek working capital advances. Most small firms have documented credit card processing activity and sales volume. This documentation of processing activity and sales volume is a financial asset, since up and more can typically be obtained a business cash advance based on future sales volume. Before this strategy for working capital business cash advances businesses should realize that there is several ways to potential problems that they need to anticipate we can mention on of this problem, highlighted below are ten common credit card receivables problems to be avoided when business owners are considering this financing approach.
Bush, S (2009) Owners face problem when the find difficulties' from earning short term loans. New business owners of finance worrying to take mortgage from different owners so they found difficulty to pay them back not in time not the promise that make, in this happen on working capital when bank will stopped give short term loan to small firms. By searching owners hoping some guide what business borrower can do if bank decline their commercial mortgage application. Second reasons which way can say that when owners feel there are no hope to earn from bank, perhaps they start to search into another source for example, by searching online. Third because of difficulty there is no substitute solution for commercials borrower. Most business finance strategies are highly likely to be more complex than expected by business browsers. .
Padachi, K (2006) The structure of working capital management is important to the economic business of all size of different firms. However small firms owners the amount that invested in working capital management are likely will be high percentage to total asset employed and so it is very important so that owner must be careful to use this amount in an efficient and effective way. Other hand, there is evidence that small firms facing problems and many of firms are not very good at managing their working capital. Small business owners can be profitable firm and this happen when cash transform into operation within operating cycle, the firm should borrow to hold up its unrelenting working capital supplies. For example, profitability and liquidity must be synchronized and one should not impose on the other for long. In current asset investment should be to be expected to ensure delivery of good or services to last customer and a right administrative of same should give the most wanted impact on moreover profitability or liquidity. If resources are uncreative at different level of the supply cheek, this will make longer the cash operating succession. Other hand this will increase profitability and also the sale will increase at the same time it will effect the profitability and this happen when cost tied up in working capital exceed the benefit of holding more inventory or granting more trade credit to customer.
Analysis on working capital management:
After gathering information we found with the purpose of, in working capital management that three articles we make summery to find out the problems that happening in small firms there are different problems one of the articles say small firms owners, the amount that invested in working capital will be in high percentage to the total asset employed. So here owners must be careful to look after his business, they have to take while decisions, for example: receivables, payables and stock, owner must be attention on this particular side because this side problems mostly happen in small firms, for example: in stock dose supply come delay or by month or yearly, perhaps some owners keep enough stock so that product will be enough for one years, another problem dose customers pay by cash or by credit in this position same small firms will fall down because of credit and it happen by customers actions, made promise to pay but not in time. After comparing all this tribulations for example in Oman we met many of small firms and asking many question about: debtors, customer, and stock not of this kind of problem happening. For example, when customer coming into shop to purchase the owner will accept to pay cash not by credit, and about the supply most owners on small firms have his on company to supply his business so he do not have to pay any cash to suppliers.
Maintaining profitability
Handel man, M (2009) According to this author he mention some problems that owners find difficulty to run business in this as profit, commercials business not have that much to make money so they closed business. Bizbuysell.com, data follow the health of the small business market the first part confirm to facilitate 36 percent decrees in the amount of business because of sale transaction in that have compared to the same time in 2008. sadly the second part released data showed the situation has gotten worse, but also in this part many business fall down between 50 percent business have closed in the reasons since profit been dropped on 2.5 percent. Owners should think carefully and make good plan to lead his business how to grow other hand he must also consider about location. After all in this case there are some key attributes involved. Any business owner with a company on the market or who is planning to do so should be aware of the following two considerations, clear possible of profitability means owners looking into and focusing how to purchase, owners to fell confident in the ability of business to make money on future, but if commercials owners sellers impossible their companies for success, they will found hard time to attract customers the keeping possible customers not interested not long enough to observe the business to get off the ground. Second the author mentions about strategic value, the important for owners sellers to show possible consumers that the have minted profitability during this difficult economic time, but also commercials owners can provide evidence the business has possible to grow and will increase to better amount. In this articles we can say much we already read the articles that European country facing problems because of sale transaction, and also they mined depend in thinking how to purchase that why for this reasons Europeans country facing problems. So comparing our country might not find such of problems we ask many owners, owners with 3years of starting business dose not have these problems and the good since in our country small firms growing so fast without any difficulty.
Chapter 3
Conclusion
These researches have different analyses and have identified serious management follow and are likely to assist owners in recognize areas where they might to get better the financial performance of their operation. The results have provided owners with information regarding the basic financial management apply used by their advantages and their advantages feelings in the direction of these practices. As such, the small firms should ensure a good organization of its asset and liabilities. This study has shown that the articles and issue business has been able to achieve high gain on the variety of device of working capital, capital formation, and maintaining profitability. On this basis this manufacturing may be referred the and could thus be used as best practice among the SME. Further, this research concludes that there is an imperative for further empirical studies to be undertaken on small business financial management; in exacting an industry analysis can help to UN cover the factors that explain the better presentation for some industries and how these best apply could be complete to other industries. This study has come at an appropriate time where the government is set up resources to help the SME sector so that the letter can certainly supply to the economy. This analysis has been forced to size and the nature of data, which could have well affected the results .future studies will aim at increasing the sample size for unmoving and dependable board estimates.
Chapter 4
