State of the Art of Short-Run Financial Management

In 1973 Smith [170] presented the state of the art of working capi- tal management (WCM) .He traced the development of research in working capital management, thereby providing an anchor for measuring future research productivity.Since the early 1970s the development of substantive WCM research has expanded dramatically, therefore, it seems appropriate to update the state of the art of short-run financial management (SRFM).SRFM reflects a broad, dynamic perspective in contrast to WCM, which connotes a static view with a balance sheet orientation.Therefore, in this paper SRFM is used to encompass all of the components that affect the inflow and/or outflow of cash through a firm.The objectives of this paper are to interpret the major directions of SRFM research in recent years and present a criti- cal review of the SRFM literature; and finally, to hypothesize various paths that future SRFM research might follow.Before evaluating recent contributions to the SRFM literature it is useful to identify major SRFM research themes.Exhibit 1 presents a three dimensional framework developed by Howard [88] that characterizes decision problems by their underlying structure.The three dimensions of the problem space are degrees of uncertainty, time dependence, and complexity.The degree of uncertainty ranges from deterministic situations where all variables are known, to highly