FEATURE PAPER

How Do Small Firms Use Financial Statements?

The following paper was written by Howard Van Auken of Iowa State University and Shawn M. Carraher of Minot State University/Severson Entrepreneurship Academy and was presented at the 2011 Allied Academies International Conference in Orlando, Florida.

Abstract

Financial statements are prepared so that the financial information can be used by stakeholders to better understand and mange the firm. An important aspect of using financial statements is to help make better decisions, especially as related to the financial impact of the decisions. Effective interpretation and use of financial statements is important because poor financial capitalization is a leading cause for small firm failure (Coleman, 2000 and Carter and Van Auken, 2005). Because poor decisions can lead to financial stress and failure, the role of financial statements is central to maintaining firm competitiveness and solvency (Coleman, 2000; Wiklund and Shepherd, 2005). In this paper we examined factors associated with whether SME owners: (1) use financial statements and (2) comfort with their ability to interpret financial statements. Both issues are important to examine because of the importance of financial statements among all stakeholders. The vast majority of the research on the use of financial information and financial statements has been focused on large firms. There appears to be few papers on how SMEs use financial statements in making decisions (Shields, 2010).

(Read Entire Paper)

TIP OF THE WEEK

Appropriate Business Etiquette in Offshore Markets

An area that is sometimes misunderstood by executives who visit foreign shores to transact business involves the use of appropriateetiquette. What might be acceptable in the United States might be improper in another country. What is considered proper etiquette in everyday business transactions at home is not necessarily looked upon with favor elsewhere. In Bulgaria, for example, nodding your head indicates disagreement, whereas in the United States it indicates agreement. Such a simple misunderstanding could kill a deal.

The guidelines for proper etiquette include dressing appropriately, making certain that appointments are kept within the expected time, carefully choosing topics for discussion and avoiding those that could prove offensive, using appropriate names and titles of individuals at the meeting, knowing when to give a gift and which types are appropriate, and using proper language.

One of the best ways to level the playing field is to use an interpreter. He or she will be capable of not only understanding the language, but also the nuances that make up the discussion and negotiation. Companies such as Executive Planet Inc. have interpreters available for the vast majority of languages that the American buyer, or any businessperson, might warrant. They also producepalm-powered guidesfor those who regularly go offshore to transact business. A wealth of topics are covered in these devices that buyers can use to learn the proper guidelines for such meetings.

The number of countries that buyers from the United States visit periodically to satisfy their professional purchasing requirements are numerous. The following exploration will be restricted to some of the major venues that American buyers visit.

China

Headlines in trade papers and consumer periodicals, as well as television news broadcasts, immediately reveal the ever-increasing importance of China as a supply nation. Whether it is electronics or fashion, and a wealth of other products, buyers are flocking to China's major production centers to purchase products that they will export to their retail operations. Whether it is Hong Kong, a longtime favorite under British rule, and now officially part of the People's Republic of China; Singapore, fast becoming a threat to Hong Kong's dominance; or any other Chinese province, the rules of etiquette are specific and must be understood by foreign purchasing agents to ensure that they will be treated properly.

Business Dress

Conservative dress is the key. For men, suits and ties are essential, with subtle coloring the norm. Bright colors are considered inappropriate and should be avoided. Women should also be conservatively dressed in either business suits with high-neck blouses or dresses. Short skirts are out of the question. For meetings, care must be exercised that women never appear taller than their male counterparts. Thus, flat shoes or low heels are best. If there is an after-dinner reception, higher heels are acceptable. For business meetings, jeans and other casual attire are unacceptable.

Punctuality

Appointments should be set far in advance of the proposed meeting. Not only does this ensure better use of the time allocated for these foreign visits, but it is also expected. Once an appointment has been confirmed, arriving on time is essential. Latecomers will be looked on as insulting the host company. Punctuality is considered a matter of respect. If lateness occurs because of an unforeseen problem, profuse apologies are a necessity. It should be understood that while the workday is typically from 8 AM to 5 PM, a two-hour break is typical from noon to 2 PM. Executives sometimes take an even longer lunch period.

ANNOUNCEMENTS

Carland Academy

Want to learn how to commercialize an idea? Carland Academy is the complete source for online entrepreneurship training on the internet. For more information,click here.

SBI

Mark your calenders! The 2012 Annual SBI Conference will be held in San Antonio, Texas, Thursday through Saturday, February 16-18, 2012. For more information,click here.

ICSB

International Council for Small Business will be holding its International World Conference during June 10-13, 2012 in Wellington, New Zealand. For more information,click here.

Small Business Institute

The Small Business Institute will be holding its 2012 Annual Conference during February 16, 2012 in San Antonio, TX. For more information,click here.

CONFERENCES

CALLS FOR PAPERS

SBANC STAFF

Main Office Phone:(501) 450-5300

Don B. Bradley III, Executive Director of SBANC & Professor of Marketing - Direct Phone:(501) 450-5345

Matt Yancey, Development Intern

Raven Ambers, Development Intern