A microcomputer-based application of a cash decision model for small businesses

Abstract

Cash decision-making involves the simultaneous consideration of financing and investment opportunities over a short-term planning horizon. Decision variables include timing, amount, and source of cash transactions. Decisions can be made regarding these variables such that the worth of the firm (i.e. outstanding investments less financing) at the end of the planning horizon is maximized.

Because cash decision-making is often of critical importance to small business, this study focuses directly on the small business environment. Alternatives available to the small business are limited, as are the resources to evaluate alternatives. This stv.dy takes these factors into account by building a cash decision model which is specifically tailored to the small business, and implementing this model on a low-cost, high-powered microcomputer.

The model itself is formulated as a linear program with a simple procedure included for handling noncontinuous variables. The model makes use of input generators for ease of implementation. A practical example problem is provided to illustrate the workings of the model.