FINANCIAL MANAGEMENT AND INVESTMENT EVALUATION IN NASCENT BUSINESS VENTURES: AN ANALYTICAL REVIEW
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FINANCIAL MANAGEMENT AND INVESTMENT EVALUATION IN NASCENT BUSINESS VENTURES: AN ANALYTICAL REVIEW
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Entrepreneurship has become a critical driver of economic growth, innovation, and employment creation in both developed and developing economies (Hisrich et al., 2017). However, nascent business ventures—firms in the early stages of establishment—often face significant challenges related to financial management and investment evaluation (Brigham & Ehrhardt, 2019). Effective financial management involves planning, organizing, controlling, and monitoring financial resources to achieve organizational objectives, while investment evaluation refers to the process of selecting profitable projects and allocating limited capital efficiently (Ross et al., 2020).
Seed-stage ventures, in particular, operate under conditions of high uncertainty, limited capital, and resource constraints, which makes sound financial planning and investment decision-making crucial for survival and growth (Cassar, 2004). These ventures often rely on external funding sources, such as angel investors, venture capital, or microfinance, which increases the need for robust financial evaluation mechanisms to assure stakeholders of project viability (Bhide, 2000).
Despite the increasing importance of entrepreneurship in economic development, many nascent ventures in Nigeria and other emerging markets experience high failure rates due to poor financial management practices, inadequate assessment of investment opportunities, and ineffective resource allocation (Adegbite et al., 2018). Studies have shown that entrepreneurs who adopt structured financial planning and analytical investment evaluation are more likely to achieve sustainability and profitability in the early stages of their business (Gompers et al., 2020).
1.2 Statement of the Problem
Nascent business ventures face numerous financial challenges that often hinder their growth and long-term sustainability. Many startups struggle with inadequate working capital, poor budgeting practices, and inefficient use of resources, which lead to liquidity problems, project abandonment, or complete business failure (Harrison & Mason, 2019).
Moreover, a lack of formal investment evaluation frameworks means that entrepreneurs frequently make decisions based on intuition rather than quantitative analysis, exposing their ventures to high financial risk (Damodaran, 2012). In Nigeria, this problem is exacerbated by limited access to formal financial services, fluctuating economic conditions, and regulatory constraints that make raising and managing funds particularly challenging for seed-stage ventures (Ogunleye & Adewumi, 2020).
Given these challenges, there is a need to systematically examine financial management practices and investment evaluation processes in nascent ventures to identify strategies that enhance decision-making, resource allocation, and overall business performance.
1.3 Objectives of the Study
The primary objective of this study is to analyze financial management and investment evaluation in nascent business ventures. The specific objectives are:
To examine financial management practices adopted by nascent entrepreneurs.
To evaluate investment decision-making processes in early-stage ventures.
To assess the impact of financial planning on the sustainability of nascent businesses.
To identify challenges faced in financial management and investment evaluation.
To suggest strategies for improving financial decision-making and investment effectiveness in seed-stage ventures.
1.4 Research Questions
The study seeks to answer the following research questions:
What financial management practices are commonly adopted by nascent entrepreneurs?
How are investment decisions evaluated in early-stage ventures?
What is the relationship between financial planning and sustainability of nascent businesses?
What challenges do entrepreneurs face in managing finances and evaluating investments?
Which strategies can improve financial management and investment decisions in seed-stage ventures?
1.5 Significance of the Study
This study is significant for several reasons. First, it provides entrepreneurs with insights into effective financial management and investment evaluation techniques that enhance survival and growth in nascent ventures (Brigham & Ehrhardt, 2019). Second, the findings can inform policymakers and financial institutions on how to design support mechanisms, funding schemes, and advisory services tailored to early-stage ventures (Adegbite et al., 2018). Finally, the study contributes to academic literature on entrepreneurship finance by highlighting practical and analytical approaches to decision-making in resource-constrained, high-risk startup environments (Gompers et al., 2020).
1.6 Scope of the Study
The study focuses on nascent business ventures operating at the seed stage, with emphasis on financial management practices, investment evaluation processes, and decision-making challenges. The research is limited to ventures in Nigeria, considering the peculiar economic, regulatory, and financial conditions in the country.
1.7 Operational Definition of Terms
Nascent Ventures: Businesses in the initial stage of formation, often characterized by high uncertainty and limited resources (Cassar, 2004).
Financial Management: The process of planning, organizing, directing, and controlling financial activities such as procurement and utilization of funds (Brigham & Ehrhardt, 2019).
Investment Evaluation: The process of assessing potential projects or assets to determine their profitability, feasibility, and risk (Ross et al., 2020).
Seed-Stage Ventures: Startups that are in the earliest phase of business development, often requiring external funding to validate concepts and enter the market (Bhide, 2000).
Sustainability: The ability of a business to maintain operations and generate value over the long term despite challenges (Gompers et al., 2020).
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