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Cash management, liquidity, and longevity of family-owned restaurants

ProQuest Dissertations and Theses, 2011
Dissertation
Author: Curtis Webley
Abstract:
The majority of family-owned restaurants go out of business within the first 4 years of operations. This is financially disruptive to families and communities. The purpose of this explanatory study was to examine the effect of cash management on the liquidity and longevity of family-owned restaurants. This quantitative research study was based on literature from entrepreneurship, the family firm, cash management, and financial reporting. A self-administered questionnaire was used to collect data on cash management practices and financial performances from 102 family-owned restaurants in a Midwestern U.S. suburb. Based on the principles of cash management practices among publicly traded companies which include monitoring the cash cycle of a business, preparing a cash budget with the basic financial statements, and applying standard debt management and longevity tools, data were gathered to determine if these principles applied to family-owned non-franchised restaurants. The data were analyzed with the use of the t-test to determine if there is a relationship between cash management and liquidity and cash management and longevity of business operations. The results of this study support the hypotheses that a relationship exists between the independent variable, cash management, operationalized as good cash management/poor cash management, and each of the dependent variables, liquidity and longevity (p<.001). This study contributes to positive social change by showing that restauranteurs who incorporate proper cash management practices can significantly improve the liquidity and longevity of their businesses; thereby bringing greater economic stability to families in the communities in which they are located.

i Table of Contents List of Tables .......................................................................................................................v List of Figures .................................................................................................................... vi Chapter 1: Introduction to the Study ....................................................................................1 Introduction ....................................................................................................................1 Background of the Study ...............................................................................................4 Problem Statement .........................................................................................................6 Purpose of the Study ......................................................................................................7 Nature of the Study ........................................................................................................7 Research Questions and Hypotheses .............................................................................9 Theoretical Base...........................................................................................................10 Definition of Terms......................................................................................................16 Assumptions .................................................................................................................18 Limitations ...................................................................................................................19 Delimitations ................................................................................................................19 Significance of the Study .............................................................................................20 Social Change Implication .................................................................................... 24 Rationale of the Study ..................................................................................................26 Summary and Transition ..............................................................................................27 Chapter 2: Literature Review .............................................................................................29 Introduction ..................................................................................................................29 Entrepreneurship ..........................................................................................................30

ii Differences between Family-Owned Firms and Non-family Firms ............................38 Family-Owned Businesses ...........................................................................................41 Human Capital ...................................................................................................... 43 Social Capital ........................................................................................................ 44 Patient Financial Capital ....................................................................................... 44 Survivability Capital ............................................................................................. 45 Governance Structure and Agency Costs ............................................................. 45 The Cash Cycle of a Restaurant ...................................................................................47 Preparing and Understanding the Financial Statements ..............................................48 Managing Cash Flows..................................................................................................53 Cash Management ........................................................................................................55 Managing Debts ...........................................................................................................60 Preparation of a Cash Budget ......................................................................................67 Summary ......................................................................................................................70 Chapter 3: Research Method ..............................................................................................73 Introduction ..................................................................................................................73 Research Design and Approach ...................................................................................73 Survey Research Method ...................................................................................... 74 Experimental Research Method ............................................................................ 75 Research Approach ......................................................................................................76 Setting and Sample ......................................................................................................79 Sampling Procedures ...................................................................................................80

iii

Probability Sampling ............................................................................................ 80 Non-probability Sampling .................................................................................... 84 Sampling ......................................................................................................................85 Sample Size ........................................................................................................... 85 Sample Error ......................................................................................................... 86 Gaining Access to Participants ............................................................................. 87 Data Collection and Analysis.......................................................................................88 Data Collection ..................................................................................................... 88 Data Analysis ........................................................................................................ 91 Instrumentation and Materials .....................................................................................93 Instrumentation ..................................................................................................... 93 Measurement ......................................................................................................... 97 Ethical Consideration .......................................................................................... 110 Summary ....................................................................................................................112 Chapter 4: Results ............................................................................................................114 Introduction ................................................................................................................114 Hypotheses .................................................................................................................114 Pilot Study Pretest ......................................................................................................115 Data Collection for the Study Instrument ..................................................................116 Response Rate, Demographic Distribution, and Sample Characteristics ..................117 Descriptive Statistics of the Survey Instrument .........................................................117

iv Descriptive Statistics and Reliability Index (Cronbach’s Alpha) of Measures in the Main Survey for Cash Management ....................................................119 Data Analysis and Results .........................................................................................120 Good versus Poor Cash Management ................................................................. 120 Research Question 1 ........................................................................................... 121 Research Question 2 ........................................................................................... 123 Summary ....................................................................................................................123 Chapter 5: Discussion, Conclusions, and Recommendations ..........................................125 Overview ....................................................................................................................125 Summary of Research Findings .................................................................................125 Interpretation of Findings ..........................................................................................127 Implications for Social Change ..................................................................................130 Recommendations for Action ....................................................................................131 Recommendations for Further Study .........................................................................132 Conclusion .................................................................................................................132 References ........................................................................................................................134 Appendix A: Survey Participation Request .....................................................................157 Appendix B: Survey Participation Request .....................................................................160 Appendix C: Raw Data for the Survey Instrument ..........................................................162 Appendix D: Cash Management Survey Questionnaire ..................................................166 Curriculum Vitae .............................................................................................................177

v List of Tables Table 1. Descriptive Statistics and Reliability Index (Cronbach’s Alpha) of Measures in the Main Survey Instrument .................................................................................... 119 Table 2. Statistics of Dependent Variables ..................................................................... 122 Table 3. Good Cash Management versus Poor Cash Management ................................ 128 Table 4. Categories of Good Cash Management Practices ............................................. 129

vi List of Figures Figure 1. Histogram of Average Cash Management Scores in Pilot Study .....................118

1 Chapter 1: Introduction to the Study Introduction Businesses are considered the financial spine of a country (Crane & Crane, 2007). They drive its economy, providing goods, services, and employment to the nation. Businesses, small and large, are made up of entrepreneurs which include the self employed, managers, and stockholders of all ages, races, and genders who have become empowered to take risk and reap a reward rooted in the success of their creation (Small Business Association [SBA], 2007). Small businesses make two vital contributions to the economy (Kuratko, 2005). First, “they are an integral part of the renewal process that pervades and defines market economies. Entrepreneurial firms play a crucial role in the innovations that lead to technological change and productivity growth” (p. 578); “67% of all new inventions are created by smaller firms” (Reynolds, Hay, & Camp, as cited in Kuratko, 2005, p. 577). Second, “entrepreneurial firms are the essential mechanism by which millions enter the economic mainstream. Entrepreneurial firms enable millions of people, including women, minorities, and immigrants, to access the pursuit of economic success” (p. 578), by providing employment for the unemployed, and inspire others to become entrepreneurs. Small business growth in the United States increased over the last 2 decades, especially in the 1980s (Hormozi, 2004). In 2006, small businesses employed 50% of the private work force, accounted for 47% of sales, and 50% of private sector Gross Domestic Product ([GDP] SBA, 2007). Tax cuts, economic prosperity, technological advances, and corporate downsizing contributed to this growth (Hormozi, 2004).

2 Although small businesses have continued to grow, most of them closed their doors within the first 4 years of operation (Knaup, 2005; Knaup & Piazza, 2007; SBA, 2007). There are many factors that contribute to this failure; the most common reason to be a lack of proper cash management (Brown, 2007; Fuller-Love, 2006; Miller & Galeaz, 2007; Peavler, 2009). The SBA postulated that financial foresight, planning for cash flow and capital needs, is a requirement of entrepreneurial management. It has become one of the greatest threats to the survival of new businesses, because the appearance of short- term success reduces financial insight and vigilance. Brown (2007) asserted: Every business owner should have an understanding of the process of raising capital, managing cash flow, and reading basic financial statements such as a balance sheet and an income statement. If one doesn’t understand these concepts, it is impossible to measure the success of a new business or even to recognize when it is beginning to fail. (p. 16) When a small company is unable to meet its obligations, the causes for failure are always the same: lack of cash, inability to raise capital, and loss of control due to escalating expenses (Reiss, 2008; SBA, 2007). These three financial burdens often hit together at the same time. Yet, any one by itself endangers the health, if not the life, of the new venture (Illinois Department of Commerce and Economic Opportunity [IDCEO], 2006; SBA, 2007). These businesses need cash flow analysis, cash flow forecasts, and cash management skills in order to stay financially focused. Failure to properly manage cash could add to their untimely demise (Brown, 2007). The implication is that small business owners must be aware that cash management plays a vital role in the survival and

3 longevity of a business. This requires ongoing monitoring of financial resources to ensure that enough cash is available, controls are in place to alert managers of cash needs, and that the vehicle to provide additional cash inflows is in place to help reduce financial burden when the need arises. As small businesses grow, an increase in sales of 40 to 50% requires a new capital structure and ongoing implementation for the company to become successful. Private sources of financing, such as from family members, become inadequate and should be replaced with public sources such as equity financing (Salvato, 2004; SBA, 2008). Zhenyu, Chua, and Chrisman (2007) argued that public sources of financing involve significant costs and economies of scale favor private sources of financing. While this may be correct, Salvato argued that financial resources are likely to be scarce in family businesses, and external sources of funds should be secured. This is because new businesses or competitors may enter the market, and plans must be in place to facilitate growth. Internal factors, such as increases in sales volume, employees, and organizational complexity, also may cause the small businesses to grow, and may require owners to acquire new skills (SBA, 2008). This includes a good management system to build team efforts rather than having one or two persons doing everything; otherwise, a management crisis may occur (Lynott, 2007). There could be limited success if the operations become so routine that people of limited competence can do a good job with limited supervision (Reider, 2008). This is because good management requires employees to acquire adequate skills to help the business grow. Without this expertise, growth will be limited, which can have an adverse effect on the business.

4 Small business failure can and should be prevented because if owners look more closely at the financial data, they should see signs of cash flow problems that require preventative actions to avoid a financial collapse (Coyne & Singh, 2008). For this reason, cash flows, capital, and financial controls should be in place and should take precedence over short-term profit. Owners of new ventures typically make profit a priority, rather than focusing on cash flow; even though the company needs added resources (Gomez & Korine, 2008). Such focus requires management to prepare a financial forecast to plan ahead for anticipated cash needs. Raising cash in a hurry is costly and uses managerial resources in going from one financial institution to another, which could be productively utilized in other areas of the operations (Duffy et al., 2005; Joabar, 2007). Aghion, Fally, and Scarpetta (2007) argued that new ventures are under cash pressure when the opportunities are greatest. Excellent products, market share, and growth prospect might be present, but without a good financial structure, control could be lost, and the business might have difficulty regaining its market position (Reider, 2008; Sihler, Crawford, & Davis, 2004). If proper financial planning is not in place, a business might not be able to acquire the inventory, innovation, and intellectual skills it needs to grow. This reduces its ability to compete, and its wherewithal to obtain cash, which is conducive to proper cash management. Background of the Study Prior to the Great Depression of the 1920s and 1930s, companies placed very little emphasis on cash management. The trend was centered on profit, and the main concern of financial management was to prevent companies from going into bankruptcy (Demers

5 & Merskin, 2000; Drucker, 1985). During the depression, revenues slowed dramatically, and many businesses were forced to close their doors, not because of a lack of profit but because of a lack of cash (Graham & Narasimhan, 2001; Smitha, 2005). This suggested that cash management was not emphasized, and profit was considered the epitome of the business operations. The structure of a company and the means of capital acquisition played a part in assessing this success or failure (Zhenyu et al., 2007). Businesses that issued stocks as investment opportunities were able to weather the storm while those that borrowed funds from financial institutions bore the burden of paying the obligation as the loan became due (Drucker, 1985; Graham & Narasimhan, 2001). Unable to meet this ongoing requirement, the once profitable companies became victims of the Depression. Those that survived were able to do so because of the agility factor associated with paying dividends to its stockholders and investors. The cash was used in operations and payments to stockholders as a return on capital investments became secondary (Drucker, 1985; Gomez & Korine, 2008). Financial institutions also were forced to reduce line of credits and negated to renew loans in order to stay afloat (Ferguson, 2008; Graham & Narasimhan, 2001; Smitha, 2005) since the businesses that were financed through debts secured by the financial institutions were not in any position to meet their monthly obligations. Many company executives thought that sales would continue to drive businesses, and there would never be a need to worry about cash flows as long as customers were spending their money to acquire goods and services (Graham & Narasimhan, 2001). It

6 was a lesson that was yet to be learned. Liquidity problems occurred twice-once in the 1920s and again in the 1930s (Drucker, 1985; Ferguson, 2008; Smitha, 2005) which reaffirmed the lack of financial planning, preparedness for financial liquidity, and failure to maintain a balance between consuming and generating cash. Many companies did not see a need to invest in human capital to right the wrongs of the past. The Great Depression gave birth to new financial policies and human intellect began to play a key role in balancing the effects of prosperity with the periods of depression and recession (Ferguson, 2008; Graham & Narasimhan, 2001; Smitha, 2005). This era forced companies to realize the importance of financial liquidity and the role of cash flow management in the operation of a business. Unsound and incubatory financial structures began to unfold with the dramatization of both the depression and the recession (Drucker, 1985; Graham & Narasimhan, 2001). Consequently, cash management eventually became the financial tool for vigilance, constant perusal, and implementation to mitigate this pariah. This suggested that a learning process began to emerge and the commandments for cash management began to take shape. Problem Statement There is a problem with poor cash management of family-owned restaurants as evidenced by their high failure rate in the United States. Sixty one percent of all new restaurants closed their doors within the first 4 years of operation (Knaup, 2005; Knaup & Piazza, 2005; SBA, 2008). There are several factors contributing to this high failure rate. Among them are ineffective marketing, managerial limitations, insufficient start-up capital, and poor cash management (Jordan, 2007; Lynott, 2006; Peavler, 2009). IDCEO

7 (2003), Opiela (2006), Parsa, Self, Njite, and King, (2005), and Peavler argued that proper cash management can make or break a small business. Not only will poor cash management cause liquidity problems, it could lead companies to become victims (Churchill & Mullins, 2001), and adversely affect the economy and its citizens. This suggested that governmental revenue and social programs would be reduced or eliminated; unemployment would increase, and the lives of citizens in all communities would be altered because of increased poverty. This is a major ongoing problem worthy of addressing, because America depends on its small businesses to drive the economy. Purpose of the Study The purpose of this explanatory research study was to investigate the effects of cash management on liquidity, and to determine if cash management is a contributing factor that can help family-owned restauranteurs on Chicago’s Northshore increase their longevity. Surveys collected from family-owned restauranteurs who have been in business for at least 1 year were used to determine how study participants apply cash management practices in their restaurants in an effort to increase business liquidity, and longevity. This study was an examination of cash management (independent variable) and its effects on the liquidity and longevity of family-owned restaurants (dependent variables) as discussed in chapter 3. Nature of the Study The nature of this study was to determine the extent of cash management in family-owned restaurants and what relationship, if any, cash management has on liquidity and longevity. The five areas of sound cash management practices of publicly traded

8 corporations, as well as questions on liquidity, and longevity, were used to capture the data. The data, which were collected from survey questionnaires, were used with the explanatory approach to the survey research method of inquiry. The survey questionnaire emphasized each of the five categories of cash management, which according to Hancock Bank (2007), IDCEO (2004), Lynott (2006), and Mullins and Churchill (2004) are the cash cycle, cash budget, income statement, balance sheet, and the statement of cash flows. Failure to utilize any of the five categories of cash management showed the degree of cash management, and cash management strategies that family-owned restauranteurs use as provided for in the research literature. A rating scale was established and responses were equally weighted as explained in chapter 3. Data from the questionnaire determined whether or not there is a relationship between cash management, liquidity, and longevity, and how this relationship might impair or strengthen the financial success of family- owned restaurants. The survey research method of inquiry was used to test the relationship between the variables. It was considered the best approach to this study because it is empirically verifiable, involves the quantification of data, and has the following attributes: • Survey research is guided by logical constraints and fosters understanding. • Survey research is deterministic, based on logic, and clear elaboration of cause and effect. • Survey research is general because it is conducted for the purpose of understanding the larger population from which the sample is drawn.

9 • Survey research is parsimonious; it seeks to obtain the greatest amount of understanding by examining the fewest number of variables. • Survey research is specific because the measurement of each variable is constructed from specific responses to specific questionnaire items that are coded and scored in a specific manner (Babbie, 1998, pp. 41-42). This method of research is used to measure the degree of association between two or more variables by asking participants’ questions about an object, and examining the data for evidence of a relationship. It is an efficient data gathering technique that answers many questions, and provides detail information about the heterogeneous population by studying a sample of that population (Babbie, 1998; Singleton & Straits, 2005). While the survey research method is used to test assumed causal relationship, a major weakness is that “beyond association between variables, the criteria for inferring cause and effect relationships cannot be clearly established as easily in surveys as in experiments” (Singleton & Straits, 2005, p. 277). Thus, a relationship can exist but the objective is to show that the variables are related, by examining the body of the data presented (Bryman & Bell, 2003). Although qualitative research methods were considered, they were not appropriate for this study because of their inductive nature, whose goal is to generate a theory from inferences drawn from the observation (Creswell, 2003). This is discussed in more detail in chapter 3. Research Questions and Hypotheses 1. Is there a relationship between cash management and the liquidity of family-

10 owned restaurants on Chicago’s Northshore? H o : There is no relationship between cash management and the liquidity of family-owned restaurants on Chicago’s Northshore. H a : There is a relationship between cash management and the liquidity of family- owned restaurants on Chicago’s Northshore. 2. Is there a relationship between cash management and the longevity of family- owned restaurants on Chicago’s Northshore? H o : There is no relationship between cash management and the longevity of family-owned restaurants on Chicago’s Northshore. H a: There is a relationship between cash management and the longevity of family- owned restaurants on Chicago’s Northshore. These hypotheses were developed so that they would be testable using the t-test statistical technique. The t-test was selected for this study because it is a statistical research method that is used to determine the existence of differences among population means (Aczel & Sounderpandian, 2006). Trochim (2006) corroborated this and added that the t-test also is used to test the equality of means in the null hypothesis, to see if two groups are statistically different from each other. This is consistent with the research design, and the analytical methods that are discussed in chapter 3. Theoretical Base This study was based on entrepreneurship, family firm, cash management, financial statements analysis, management accounting and financial controls, and financial ratios theories, as dictated by accounting and finance practitioners,

11 academicians, researchers, and the Financial Accounting Standard Board (FASB). “Throughout the theoretical history of entrepreneurship, scholars from multiple disciplines in the social sciences have grappled with a diverse set of interpretations and definitions to conceptualize this abstract idea” (Burnett, 2000, p. 1). Some writers have identified entrepreneurship with the function of uncertainty-bearing, others with the coordination of productive resources, others with the introduction of innovation, and still others with the provision of capital (Burnett, 2000; Shane, 2006; Shane & Venkataraman, 2000). Although some agreement emerged about the characteristics of entrepreneurship, various definitions still exist. For example, economists such as Marshall, Mill, Ricardo, and Smith, popularized and added notoriety for their contributions (Burnett, 2000; Ebner, 2006; Montanye, 2006; Shane & Venkataraman, 2000). This opened the doors to many future debates, as researchers and theorists attempted to arrive at a general consensus as to what constitutes entrepreneurship (Burnett, 2000; Kuratko, 2005; McMullen, Bagby, & Palich, 2008). Therefore, researchers continually have to define the term based on the context in which it is used in order to reduce anomalies, asymmetry, and increase comprehension in scholarly written material. Citing Schumpeter (1951), Burnett (2000) asserted that the French economist, Cantillon coined the word entrepreneur, and defined it as “the agent who buys means of production at certain prices in order to combine them into a new product” (p. 1). The author and Parker (2004) contended that economist Say expanded on this definition to include a leader who mobilizes people to obtain productive organizational synergy. Consistent with the views of Knight (1921), Parker suggested that the entrepreneur is

12 made and is considered an opportunist who can choose freely between entrepreneurship and paid employment depending on which generates greater utility. Schumpeter (1939) on the other hand, concurred with Say, but added that entrepreneurs acquire new opportunities to innovate and create wealth. The author implied that the direct result of entrepreneurial leadership is profit. McClelland (as cited in Nafziger, 1986) contended that wealth is not a source of financial enrichment, but a measure of achievement. This means that implementation to manage and minimize risk and economic uncertainty is ongoing, and could lead to satisfaction that is not associated with financial gains. With the different definitions of entrepreneurship, two train of thoughts emerged from entrepreneurship theories: The first train of thought viewed entrepreneurs as an arbitrageur who is driven by profit, and the second focused on the importance of uncertainty (Gartner, 2001; Montanye, 2006; Parker, 2004). Modern entrepreneurship theory begins with the views of Knight (1921) and added that the market is competitive, technology is given, and entrepreneurs are price takers, whose focus is the exchange of transactions between a willing seller and a willing buyer (Parker, 2004). The merging of these views indicated that while some entrepreneurs might be driven by profit, others prefer to focus on the reduction of uncertainly that is associated with the production of goods (Kellermanns & Eddleston, 2006). Still, there are those risk-averse entrepreneurs whose approach might be to obtain a balance between profit, and the production of goods. Family firm theories have been extant for the past 30 years, but they have just begun to emerge as a separate field of study. This is because researchers and practitioners

13 did not include family firms in their studies, and business theories failed to mention them as a separate form of business (Chrisman, Steier, & Chua, 2006; Heck, Hoy, Poutziouris, & Steier, 2008). Family firms were viewed as premodern businesses, concerned with wealth preservation, not equip to manage and develop corporations, exhibiting lack of self-control, and riddled with personal rivalries and nepotism (Carney, 2005). New studies have emerged that lauded family firms for their significant contribution to the United States’ economy, and to the GNP in emerging markets (Steier, Chrisman, & Chua, 2004; Sundaramurthy & Kreiner, 2008). Forty percent of the Fortune 500 companies are either family-owned or controlled, and more than half of the United States private workforce originated as a family business (Oswald, Muse, & Rutherford, 2009). In the United States, family businesses account for 49% of GDP and 78% of new job creation. Worldwide, family businesses are ubiquitous, and are the leading players in those economies (Craig, Dibrell, & Davis, 2008). Through current research, scholars have now recognized that family firms have been dominant in many economies for centuries (Carney, 2005; Chrisman et al., 2005). Researchers and practitioners have begun to notice “that the family firm is a combination of the family system with entrepreneurial behaviors of its members” (Heck et al., 2008, p. 318); many businesses still have members of the owning family involve in the business either as owner, manager, or employees (Heck et al., 2008). This creates familiness by the commingling of family resources, and the interactions and capabilities of these family members (Pearson, Carr, & Shaw, 2008).

14 Two theories emanated from scholarly studies of family firms, which are seminal to the development of family businesses (Chang et al., 2008; Chrisman et al., 2005; Sirmon & Hitt, 2003). The agency theory argued that managers are agents of shareholders, who engage in decision-making that is inconsistent with the maximization of shareholders’ wealth (Steier et al., 2004). In other words, managers may pursue their own goals for personal reasons (Oswald et al., 2009). This explains the consequences and the cost of conflict of interest, and asymmetric information that arise from the separation of ownership and management (Chang et al., 2008). The resource base value theory argued that the family firm has unique resources that allow them to develop family- driven competitive advantages (Chrisman et al., 2005). These unique characteristics include but are not limited to business survivability and governance capital (Chang et al., 2008; Steier & Ward, 2006). Little is known about why some family firms fail when others do not, and strategic management attempts to provide some answers (Kellermans & Eddleston, 2006; Sirmon & Hitt, 2003; Vought et al., 2008). Scholars argued that in order for the family firms to be successful, its resources must be effectively managed (Sirmon & Hitt, 2003). This suggested that a lack of proper management might be germane to the survival and longevity of these businesses. The views of Knight (1921) from the entrepreneurial theories, coupled with the agency theory view of family firms are used throughout the remainder of this research study. The cash management and liquidity practices of this study resulted from the residual effects of the depression and the recession of the 1920s and 1930s which, due to business failures, spawned the development of new financial techniques that would

Full document contains 195 pages
Abstract: The majority of family-owned restaurants go out of business within the first 4 years of operations. This is financially disruptive to families and communities. The purpose of this explanatory study was to examine the effect of cash management on the liquidity and longevity of family-owned restaurants. This quantitative research study was based on literature from entrepreneurship, the family firm, cash management, and financial reporting. A self-administered questionnaire was used to collect data on cash management practices and financial performances from 102 family-owned restaurants in a Midwestern U.S. suburb. Based on the principles of cash management practices among publicly traded companies which include monitoring the cash cycle of a business, preparing a cash budget with the basic financial statements, and applying standard debt management and longevity tools, data were gathered to determine if these principles applied to family-owned non-franchised restaurants. The data were analyzed with the use of the t-test to determine if there is a relationship between cash management and liquidity and cash management and longevity of business operations. The results of this study support the hypotheses that a relationship exists between the independent variable, cash management, operationalized as good cash management/poor cash management, and each of the dependent variables, liquidity and longevity (p<.001). This study contributes to positive social change by showing that restauranteurs who incorporate proper cash management practices can significantly improve the liquidity and longevity of their businesses; thereby bringing greater economic stability to families in the communities in which they are located.