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Abstract

The 1998 Survey of Small Business Finances provides robust information on the financing of small businesses including an overview of their firm's organization, financial characteristics, and credit use. Information from the survey is used in this study to compare the financial characteristics of food manufacturing and retailing small businesses. On average, both food manufacturing and food retailing small businesses had positive financial characteristics. Although they were only marginally profitable and liquid, they were highly solvent. Accounts receivable and inventory comprise nearly half of food manufacturers' total assets and a third of food retailers' assets. By most financial measures, food retailers were statistically smaller than food manufacturers. Both food manufacturers and food retailers utilized computers, primarily for accounting/bookkeeping, inventory management, and administration. Primary financial services used are for transactions and trade credit. Nearly three-fourths of food manufacturing and one-half of food retailing supply purchases involve trade credit from a large number of trade credit suppliers, on average. Both firm types have higher credit risks and are tardy with repayment of trade credit. Nonparametric rank order statistical methods were required because normality assumptions were violated due to asymmetric distribution of small firms.

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