The Role of Firm Size in Determining Access To Finance

The Role of Firm Size in Determining Access To Finance

The size of the firm plays a crucial role in determining the access to finance either long-term or short-term sources of finance.  It has gained importance in recent years to improve the better financing conditions of the firm so that it can show increased profit margins because of an adequate cash flow.  Depending on the number of employees working in the firm, the firm size is determined as it is a small, medium or large business firms.  Similarly depending upon the ownership of the firm and its structure, and also based on the turnover of the firm it is classified accordingly.

The performance of the firm is based on two dimensions i.e. financial performance of the firm and non-financial performance of the firm.  Financial performance is nothing but how far a firm is able to raise the capital for the firm, its liquidity position and so on.  The non-financial performance of the firm determines the product productivity, Profitability ratio and the market value of the firm.

Non-Financial performance of the firm:

  • The company performance of the firm is analyzed as the non-financial performance in which it has three distinct aspects to consider.
  • The first aspect is the company’s production function. The productivity of the product right from the purchase of raw materials into a finished product is one of the important aspects of the production function.  The lifecycle of production in which processing of inputs into an output efficiently
  • The second aspect is the ability of the firm to increase the profit margin of the firm. The profit margin helps to determine the turnover of the profit margin in the particular year and helps to know the condition of the firm regarding the financial position.
  • The third aspect of the firm is the market value of the firm. The market performance of the firm helps to know how far the products have reached in the minds of the customers its brand image and brand loyalty.

Financial Performance of the firm:

  • The financial performance of the firm determines the financial status and position of the firm. It also helps to determine the liquidity position and the cash flow of the firm.
  • The rise of capital is an important function performed by the owner to ensure the firm operation without any hindrances. The business owner may raise his funds from the savings or raise money through loans from the banks.
  • Some business owner tries to invest their excess funds in many money instruments and online platforms like Bitcoin trader account to avail the interest amount through their excess amount as an investment.
  • Many people think is it a safe to invest in these online platforms to earn money and increase the firm’s cash flow.