HOW DO SLOVAK SMALL AND MEDIUM-SIZED ENTERPRISES MAKE DECISION ON SOURCES OF FINANCE?

Abstract

The traditional financial theory generally presents models and approaches applicable mostly in financial management of large enterprises. Small and medium-sized enterprises are characterized by a number of specific features, which significantly differentiates them from large ones and determinates their limited access to appropriate sources of finance. In light of these differences and specific features, it is essential to draw particular attention to the decisionmaking on sources of finance in these enterprises which have a more risky profile and are much more vulnerable to the business environment and its changes. The paper focuses on the target debt ratio of Slovak small and medium-sized enterprises and its relationship with their superior business objective, size and age. It also examines the factors influencing this area of decisionmaking. The main aim of the paper then is to find out how Slovak small and medium-sized enterprises make decisions on sources of finance to perform their business activities and identify the main factors influencing these decisions. According to the results obtained, half of Slovak small and medium-sized enterprises have set the target debt ratio. It is more present in enterprises tending to prefer growth and development as their superior goal. The weak positive relationship between the existence of the target debt ratio and the size of an enterprise was also revealed. However, the existence of the target debt ratio is not determined by the age of an enterprise. Finally, the most important factors influencing financial decision-making of Slovak small and medium-sized enterprises include cost of capital and their long-term survival.