Cash flow and capital investment: Empirical evidence of firms in services and consumer goods sector

This book emphasizes financial problems that arise when managing multinational operations. However, the financial manager of a multinational company (MNC) must be familiar with certain mechanics of financing foreign trade and foreign investment because most MNCs are frequently engaged in foreign trade and investment activities.The first three sections cover the sources of financing foreign trade, while the last three sections discuss the sources of financing foreign investment. Section 10.1 discusses three basic documents involved in foreign trade: draft, bill of lading, and letter of credit. Section 10.2 analyzes the various payment terms of foreign trade. Section 10.3 describes the major sources of financing foreign trade. The three major sources of funds for foreign investment are internal sources of funds, external sources of funds, and sources of funds from development banks as described in Sections 10.4, 10.5 and 10.6, respectively. MNCs may use internally generated funds such as profits and depreciation charges. If internal sources of funds are insufficient, they may obtain their capital from sources within their home country and/or in foreign countries. In addition to these internal and external sources of funds, development banks provide MNCs with a variety of financing sources.

The purpose of this study was to determine the effect of the company's external and internal sources of funds on the Profitability of Own Capital (RMS) in Manufacturing Companies Listed on the Indonesia Stock Exchange in 2018-2020. The variables used consist of the dependent variable, namely Rentability of Own Capital (RMS) and independent variables from external funds consisting of Debt to Total Capitalazition Ratio (DCR), Total Debt to Total Assets (DAR) and Debt to Equity (DER). Meanwhile, internal funding sources consist of Flow Back Ratio (FBR). The sampling technique used purposive sampling, namely the sampling technique with certain considerations. The number of samples in this study were 75 manufacturing companies with an observation period of 2018-2020. The results of this study indicate that 4 (four) independent variables consisting of DCR, DAR,DER as an external source of funds and Flowback Ratio as an internal source of funds simultaneously affect to RMS. The conclusion from the results of the study is that companies must be able to increase capital in order to increase the value of the company in order to compete to gain and increase investor confidence. Company management needs to adjust the composition of the use of FBR as internal capital by optimizing the management of assets owned.

In recent theories of financial analysis, a financial approach has been adopted which is based on the dynamic (modern) coefficients established from cash flows - cash flow indicators. Some of the areas of their application are capital investments, which largely depend on internal sources of financing and the ability of companies to generate such sources of financing, especially in conditions of crisis and insolvency. In this regard, they have special importance for the Republic of Serbia, whose macroeconomic environment is further damaged by the current global world and energy crisis, insolvency, collapse and shutdown of domestic capacities, and the concentration of capital in the financial sector. In this study, the focus is on researching the difference between investment capacities based on internal sources of financing established on static and dynamic indicators, in order to prove the necessity of applying dynamic coefficients based on cash flow analysis, which are not very common in practice in Serbia. The advantages of using the mentioned parameters based on the cash flow concept as a modern tool in the research question on the example of energy as one of the most important branches of the Serbian economy were examined and proven.

In this paper we study the consequences of imperfect substitutability between internal and external sources of finance for firmś real decisions. The relationship between financial variables and investment when capital markets are imperfect is analysed at both the theoretical and empirical level, using two panels of individual Italian firms. Under the hypothesis that the firm incurs costs of agency and financial distress, we derive both a Q and a Euler equation model for investment, which are then estimated together with a more loosely specified investment equation. The empirical results provide support for a significant departure from the hypothesis of perfect substitutability between internal and external sources of finance.

A literary analysis of the economic issues of the education system development has been carried out, in particular from the classics of the economic theory of the development of "human capital" to the modern concepts of development of the educational branch. The conceptual analysis of the system of improvement of budgetary and extra-budgetary financing of educational institutions in Ukraine, in particular the specifics and various mechanisms of raising funds, namely internal sources of financing - state funding (budget) and external sources of financing (non-state financing).\n\nThe analysis of theoretical and methodological aspects of financial and economic support of general secondary education institutions in Ukraine is conducted. The main indicators of budget financing of general secondary education in Ukraine in the recent period are analyzed, namely: the indicator of the volume of educational subvention, the indicator of the average annual salary of pedagogical workers, the indicator "money go after the teacher", the indicator of additional expenditures. The statistics on budget financing of certain regions of Ukraine, including wage costs, are presented.\n\nAlso considered is an indicator, which the amount of education expenditures depends on, namely the indicator of the cost of an educational service. The set of factors that directly influence the cost of an educational service are also presented, namely: external factors, whose influence does not depend on the activity of a particular educational institution and internal factors that directly affect the specifics of an educational institution. The cost of educational services is also considered, depending on the order of its calculation, which in practice is reflected in the "net cost of the educational service" and "the full cost of the educational service".\n\nTaking into account the growing demand and supply of educational services, the article presents the main models of financing education in different countries of the world, in particular the model is oriented towards the free market, characterized by the reduction of public spending on education and development of competition, privatization of educational institutions, development of private educational institutions; the model, oriented on the public market, is characterized by partial privatization of the system of educational institutions, reduction of state funding of education and increase of individuals' investments in quality education; The anti-market model of education financing, oriented towards the alternative integrated society, is characterized by the overwhelming role of the state in solving the issues of education financing, budget financing

PurposeThe purpose of this paper is to examine the impact of bank financing and internal financing sources on women’s motivation for e-entrepreneurship.Design/methodology/approachFemale owners of e-businesses in India were surveyed regarding their perceptions of bank financing, internal financing sources and their motivations for e-entrepreneurship.FindingsThe findings of this study show that bank financing and internal financing sources positively impact women’s motivation for e-entrepreneurship in India. The results show that family status, education, easy access to new business information and location positively impact women’s motivation for e-entrepreneurship in India. The findings also show that bank financing has a higher impact on women’s motivation for e-entrepreneurship compared with internal financing sources.Research limitations/implicationsThis is a co-relational study that investigated the relationship between bank financing and women’s motivation for e-entrepreneurship and the relationship between internal financing sources and women’s motivation for e-entrepreneurship. There is not necessarily a causal relationship between the two. The findings of this study may only be generalized to individuals similar to those that were included in this research.Originality/valueThis study contributes to the literature on the impact of bank financing and internal financing sources on women’s motivation for e-entrepreneurship. The findings may be useful for investment advisors, the Indian Government and entrepreneurship consultants.

We investigated the association between socially responsible investment, internal financing sources, and access to bank financing in the production industry of India. Using a survey research design, owners of small production firms were asked about their perceptions regarding socially responsible investment, internal financing sources, and access to bank financing. We found that socially responsible investment and internal financing sources help owners of small production firms improve access to bank financing. This study contributes to the literature on the relationship between socially responsible investment, internal financing sources, and access to bank financing. The findings may be useful for financial managers, production firm owners, investors, consultants, and other stakeholders.

This study examines the determinants of new firm creation in Africa, focusing on external and internal funding sources and their interactions. It also explores the influence of colonial history by separately analyzing former British and French colonies. The primary goal is to help fill crucial gaps in African literature on the determinants of entrepreneurship. Given Africa's widespread poverty and underdevelopment, understanding what drives entrepreneurship is essential for job creation and economic growth. The study reveals three key findings. First, at the full sample level, remittances are the only external financing source positively associated with new firm creation, while foreign aid and foreign direct investment obstacle it. Internal sources, like savings and credit, do not show significant effects. Second, the subsample analysis reveals heterogeneous results: former British colonies' funding sources align with the overall findings, while in former French colonies, only savings support entrepreneurship. Third, considering control variables, the subsample analysis indicates two distinct entrepreneurship models: opportunity-based in former British colonies and necessity-based in former French colonies. These findings are noteworthy and provide significant policy implications at both national and international levels. Crucially, the positive role of remittances in financing new business initiatives, confirms that migration serves as a mutually beneficial arrangement for both sending African countries and the host countries.

Research aims: This study examines how firm size influences the relationship between internal funding sources, particularly liquidity, and external funding sources, i.e., debt, on firm value, emphasizing profitability’s mediating role.Design/Methodology/Approach: This study examines publicly traded manufacturing companies in the consumer products sector that are listed on the Indonesia Stock Exchange (IDX) between 2019 and 2023. A sample of 43 companies and 215 observations was obtained through a targeted sampling approach. The data were analyzed using WarpPLS 7.0 software, which supports mediated regression analysis.Research findings: The findings indicate that while liquidity positively impacts firm value, this impact is statistically insignificant. Conversely, the debt policy significantly enhances firm value. Furthermore, profitability acts as an effective mediator in the relationship between liquidity and debt policy on firm value, with firm size further amplifying the impact of profitability. These results emphasize the crucial role of profitability as a mediating factor and firm size as a moderating factor.Theoretical contribution/Originality: This study is expected to enrich the Agency and Pecking Order theories by clarifying the role of profitability as a mediator in the relationship between debt policy and firm value with the factor of firm size as a moderating relationship between profitability and firm value, as well as providing practical insights for business executives in making strategic decisions related to the management of funding and corporate debt structure.Practitioner/Policy Implications: Indonesian companies, especially those listed on the Indonesia Stock Exchange and involved in consumer products, can use liquidity and debt to improve performance and firm value. This study takes a fresh perspective by directly addressing profitability's mediating effect and company size's moderating influence. This methodology provides deeper insights into funding sources and corporate value.Research limitations/implications: This study has several limitations, including a focus on manufacturing companies in Indonesia and data limited to 2019 to 2023, which may affect the generalizability of the results. In addition, this study only considers debt policy, profitability, and company size. At the same time, other factors such as ownership structure and macroeconomic conditions are not considered, so expanding the coverage of sectors and regions is recommended and using more sophisticated analytical methods for future research.

Using an original survey sample of 103 unquoted Belgian technology-based small firms (TBSFs), we examine the capital structure of start-up companies during their consecutive development stages. We find that internal funds, either alone as personal savings or in combination with family and friends, to be the primary source of financing. Personal funds of the founders are used to finance the start of 82% of TBSFs. Commercial bank and government funds are the most important sources of external finance for TBSFs subsequent to start-up. Most founders agreed that business angels and venture capitalists play a greater role at later stages. However, once granted, more substantial amounts of funding come from venture capitalists. There is also evidence that suggests a change in the mix of internal and external sources of finance. Finally, our findings based on founders’ scores in raising external funds suggest a call for urgent policy action to improve access to and availability of early-stage entrepreneurial finance in Belgium. We discuss our findings in light of the capital structure of small firms relating to TBSFs.

The author considers influences of active regulation of operating costs and negative effects (shocks) on financial policy of the Russian public companies. The Russian firms make the choice for benefit of internal financing for the purpose of increase in the corporate benefit in the conditions of external financial restrictions (sectoral sanctions). Growth of the corporate benefit leads to increment of company assets and respectively to welfare of the shareholder. The Russian public companies will review the capital structure in the conditions of growth of adjustment costs. The active policy of the Russian companies is connected with availability of sufficient size of assets which are source of mortgage providing for regulation of capital structure. Thereby, the organization solves problem of adverse selection – financing source selection taking into account its price. The companies are forced to regulate actively the capital structure in the conditions of growth of operating costs and negative shocks. Regulation of capital structure is connected with the aspiration of the company to keep part of debt for its use as financing source. Operating costs are the indicator estimating efficiency of management decisions. The Russian companies will finance the investments, first of all, by internal financing sources. Cash flows are the resource servicing the investment capital. The firms will be attracted the loan capital in the period of deficit of cash flow. The Russian companies will work in logic of precautionary motive, creating monetary stock in the conditions of shocks. The precautionary motive is the protective buffer from negative impacts from the capital markets. Low values of cash flows allow to limit the management concerning his illegal behavior – decision making in private interests.

This paper analyzes the effects of the form of ownership on the substitutability between internal and external sources of finance in Italy. In particular, we test whether financial constraints are more severe for independent firms compared to members of large national business groups and subsidiaries of foreign multinational corporations. The results obtained from flow of funds and investment equations estimated for a panel of Italian companies imply that independent firms face more severe financial constraints. In fact, not only members of national groups and subsidiaries of multinational corporations find it easier to substitute cash flow with external finance when the former falls but they do not display excess sensitivity to cash flow and debt in their investment decisions.

The overwhelming majority of countries lack their own resources to carry out socio-economic transformations, cover the budget deficit and make domestic investments, which is why many countries resort to external sources of financing, hence the national debt. It will probably be quite difficult to find a country that does not resort to raising funds from external or internal sources of financing. In general, credit cannot be considered as some kind of “absolute evil”, since rationally used loans and borrowings can significantly accelerate economic development, make the process of expanded reproduction more efficient and dynamic, solve many social and economic problems, etc. at the same time, significant public debt is a heavy burden that can complicate the normal functioning of the economic system. The growth of government debt reduces the stock of capital in the economic system (since, for example, the holder of savings, instead of investing in the economy through the purchase of shares of various companies or lending extended reproduction, buys government bonds, thereby financing the state and its needs). External debt — the total debt of the state, expressed in monetary units and interest on their payments. The creation of a civilized financial space is a very important moment for each state that has embarked on the path of market relations in their full implementation. And if most countries capitalized relations long ago, then the independent countries that emerged after the collapse of the socialist empire needed to gain new experience in the shortest possible time.

Microfinance institutions (MFIs) aim to minimize their operating costs as a way to provide affordable services to the poor and attain financial sustainability for long-term economic viability. To contribute to existing literature, this paper examines the factors affecting the financing cost of MFIs. The study features a balanced panel data of 169 MFIs from Bangladesh’s microfinance industry, covering the period from 2009 to 2014. Based on the empirical results, internal sources of funds, such as clients’ savings and cumulative surplus, have a significant negative effect on the financing cost of MFIs. On the other hand, certain external sources of funds, notably donations and funds from government apex bodies, serve to reduce financing cost, which reinforces the efficiency and effectiveness of external support to the microfinance industry. This study suggests that MFIs should rely on internally generated funds and reduce dependency on commercial debt.

The funding decision represents important things that need to be considered by a manager when specify the portion of the company's capital structure that comes from internal funding sources as well as external funding sources. Therefore, this study aims to test empirically the influence the characteristics of the company that are measured by tangibility and profitability as well as the mechanisms of corporate governance that are measured by the board of directors and the independent commissioners in the determination of the company's capital structure. This research is based on the Pecking Order Theory that examines the hierarchy of corporate funding. This research was conducted on the mining company listings in BEI 2012-2015 year period with as many as 138 companies sample. Data analysis in this study using multiple regression analysis that was previously tested with classical assumptions. Hypothesis testing is done through t-Test. The results showed that tangibility, profitability, the board of directors and the independent commissioners have no effect on the decision of the company's funding. Keywords: Leverage; Tangibility; Profitability; Board of directors; Independent. commissioner. Abstrak Keputusan pendanaan merupakan hal penting yang perlu dipertimbangkan oleh manajer saat mengelola struktur pendanaan perusahaan yang berasal dari sumber pendanaan internal maupun sumber pendanaan eksternal. Oleh karena itu, penelitian ini dilakukan untuk menganalisis pengaruh karakteristik perusahaan yang diukur oleh tangibility dan profitabilitas serta mekanisme corporate governance yang diukur oleh dewan direksi dan komisaris independen dalam penentuan struktur permodalan perusahaan. Penelitian ini dilakukan pada perusahaan pertambangan yang go public di Indonesia tahun 2012-2015 dengan sampel sebanyak 138 perusahaan. Analisis data dalam penelitian ini menggunakan analisis regresi berganda yang sebelumnya diuji dengan asumsi klasik. Uji hipotesis dilakukan melalui Uji t. Hasil penelitian menunjukkan bahwa tangibility, profitabilitas, dewan direksi dan komisaris independen tidak berpengaruh terhadap keputusan pendanaan perusahaan. Kata kunci: Tangibility, Profitabilitas, Dewan Direksi, Komisaris Independen.