179-192

• Prasad, Dev.
• Μερίκας, Ανδρέας
• Bruton, Garry D.
• Vozikis, George S.

There has been relatively little research into the financing and growth rates of small firms even though they are the main vehicle for a nation's economic growth. This paper examines the relationship among retention rate, debt-equity ratio and return on assets for the small firm. The study demonstrates, through a simplified model, that the lack of an active equity market can be responsible for limitations in the size of the small firm. The model further demonstrates that if only internal financing is utilized a severe constraint is placed on the actual rate of growth of the firm. A combination of internal equity financing and external debt financing produces a higher (though still constrained) growth rate.

• Economics and Business
• Computer and information sciences

• Finance
• Επιχείρηση
• Economic development
• Statistics

Περιέχει υποσημειώσεις και βιβλιογραφία, The authors wish to thank the anonymous referees and the Editor Professor S. A. Sarantides for helpful suggestions and comments.