Cash flow estimation practices in Mediterranean countries

Abstract

Purpose – To examine, determine, investigate and compare the extent to which enterprises in Greece and Cyprus use the theoretical framework to evaluate investments which are the discouraging factors concerning the use of this framework with particular emphasis to investigate the type, size and percentage of total capital expenditures detailed cash flow estimates; cash flow estimation practices and forecasting errors experience in the businesses in Greece and Cyprus. Design/methodology/approach – The investigation was conducted by the distribution of a questionnaire to adequate number of small sized companies of Greece and Cyprus. The study was based on a questionnaire that was promoted to 800 firms in Greece and 120 in Cyprus. Findings – The results of our survey have indicated the perceived important of some financial, marketing, and production factors on the cash flow forecasting process, as borrowing and repayment of funds, sales forecast, and operating expenses. The results of our study have indicated that the majority of forecasting methods used to generate cash flow estimates is management's subjective estimates and that the majority of the Greek firms adjust capital expenditure cash flow for inflation. Practical implications – This study could potentially stimulate further research on cash flow forecasting practices of firms in other countries, such as Italy, France, and other Mediterranean countries, in order to compare the results. Originality/value – This study provides evidence on the forecasting practices of small and medium-sized companies of Mediterranean companies.