Effective working capital management in small and medium enterprises in Vietnam
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Pham, Ngoc Long
MBA in Finance
Dublin Business School
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After few decade of reforming policy, building and developing the multi-sector market economy, Small and Medium Enterprises (SMEs) in Vietnam have developed strongly and contributed to create jobs, high growth GDP, and increase the nation‟s volume of international trade. However, SMEs have faced difficulties on the way to development because of lack of business and financial management experience and financial resources, and due to uncertainty of government policies and business environment. As a result, SMEs often faced obstacles during their operations. This research examines the working capital management practices of SMEs and its consequences to determine effective working capital management for SMEs in Vietnam. Objectives of the research are to analyze the system of working capital management in SMEs, to establish the causes of any poor working capital management and to find out an effective working capital management for SMEs in Viet Nam. In terms of structure, the dissertation has seven chapters. The research begins by defining the research problem and questions, and providing a justification for the research study. Chapter one also reviews the research background, and presents definitions of terms, significance and scope of the study. Chapter two presents the economic background, business structure and the development of SMEs in Vietnam. This chapter also reviews previous research related to financial management for SMEs in Vietnam to identify the practices of financial management and working capital management for SMEs in Vietnam. Chapter three talks about the different studies of working capital management practices of SMEs in Vietnam and all over the world. This review emphasizes the theory of managing of working capital and the impact of poor working capital management on the financial situation of SMEs. Objectives of this chapter are to review previous research related to the areas of financial management practices, working capital management. Chapter four discusses aspects of the research methodology including research design, data collection and data analysis methods. Objectives of this chapter are: (1) to justify the research methodology of this study, (2) to explain research methodology used in the study, and (3) to demonstrate how research design, and data collection and analysis can be utilized in this study to answer the research questions outlined in the chapter one. Data analysis and findings are presented in chapter five. This chapter presents descriptive analysis of financial management, working capital management characteristics of two companies selected. Objectives of this chapter are to systematically present the descriptive findings of the research study, to interpret significance of these findings based on data analysis and to find out the effective working capital management for these SMEs. The research will continue with chapter six where recommendations will be suggested and applications of the research findings for the financial management practitioners. Chapter seven will be the self-reflection on learning and skill development during MBA and dissertation process. The research provides descriptive findings of financial management characteristics and working capital management practices and demonstrates the simultaneous impact of poor working capital management on SME financial position. Financial ratios will be calculated including debt ratios, all other variables including current ratio, working capital management ratios and short-term planning practices, fixed asset management and long-term planning practices, and financial and accounting information systems related to working capital management practices With the findings as presented above, this research study provides many implications for working capital management practices and contributes to knowledge of working capital management of SMEs. The recommendations of working capital management practices can be used as guidance for actions to improve the financial management of SMEs in Vietnam. Author keywords: Working capital management