Cash Assets Research Articles

Inventory in Times of War

Using data from 38,916 businesses in war-torn Colombia and from 5,138 attacks by the two rebel groups, FARC and ELN, we study how firms manage inventory during civil war. We obtain exogenous variation in the conflict intensity via a difference-in-differences model, which hinges on the peace process between Colombia’s government and FARC. Relying on this identification strategy, we hypothesize and show that war causes two effects on firm-level inventories. First, it leads firms to replace physical assets (inventory) with fungible assets (cash), causing them to operate with an over-secured financial buffer but a fragile operational buffer. Second, this inventory reduction occurs mostly in unprocessed inventories (finished-goods inventories are insensitive to violence), meaning that whereas war-torn businesses are equipped to fulfill planned orders, they become inflexible at handling uncertain future demand. We then show that the magnitude of these effects is highly contingent on the firm’s position in the supply chain, its proximity to distribution markets, and the type of attacks it is subject to. We then propose policies to address war-related risk in supply chains.

ANALISIS KARAKTERISTIK KEUANGAN TERHADAP KEBIJAKAN DEVIDEN PADA PERUSAHAAN INDUSTRY CONSUMER GOODS

The aim of the study was to obtain empirical evidences about the effect of cash ratio, debt to equity ratio (DER), return on asset (ROA), asset growth and firm size on the dividend payout ratio (DPR). The study was designed quantitatively by using the financial report of the companies listed in the Indonesia Stock Exchange, by involving 6 companies listed in the Indonesia Stock Exchange during the period 2010-2015 during six years as the samples, which were selected based on purposive sampling technique. That 36 of company’s data were obtained. The data were analyzed by using multiple linear regression supported by SPSS version 16. The results indicated that: Cash Ratio and Asset Growth had a negative effect and not significantly on Dividend Payout Ratio (DPR), while the result analysis Debt to Equity Ratio (DER) and Firm Size had a positive effect and significantly on Dividend Payout Ratio (DPR), and Return On Asset had a positive effect and significantly on the Dividend Payout Ratio (DPR). DOI: 10.26905/ap.v6i2.4596

국내 5성급 호텔기업의 현금보유비율과 경영성과에 관한 연구

This study presented the following research results by selecting 35 out of 49 5-star hotels in order to understand the effect of hotel companies' cash holding ratio on management performance. First, the management performance of a hotel company has a positive(+) average value. However, the cash holding ratio, current ratio, net working capital ratio, and cash flow ratio showed lower than appropriate ratios, indicating that the amount of cashes required for business operation is somewhat insufficient. Second, the correlation analysis between the cash holding ratio and other variables was conducted for management performance. Indexes related to debt capital show a positive(+) relationship with management performance, while indicators related to tangible assets, which are non-current assets of hotel companies, show a negative(-) relationship. Third, although there are differences in the indicators that show the influence on the management performance of hotel companies, it was suggested that management performance can be increased by utilizing variables related to the cash holding ratio. Therefore, hotel companies will need to actively utilize cash assets apart from tangible assets belonging to non-current assets that are held and used for business. Although hotel companies operate based on non-current assets, it is necessary to establish various marketing strategies using cash assets in order to improve management performance. Managers need to make decisions to verify and manage the appropriate cash holding ratio.

국내 5성급 호텔기업의 현금보유비율과 경영성과에 관한 연구

This study presented the following research results by selecting 35 out of 49 5-star hotels in order to understand the effect of hotel companies' cash holding ratio on management performance. First, the management performance of a hotel company has a positive(+) average value. However, the cash holding ratio, current ratio, net working capital ratio, and cash flow ratio showed lower than appropriate ratios, indicating that the amount of cashes required for business operation is somewhat insufficient. Second, the correlation analysis between the cash holding ratio and other variables was conducted for management performance. Indexes related to debt capital show a positive(+) relationship with management performance, while indicators related to tangible assets, which are non-current assets of hotel companies, show a negative(-) relationship. Third, although there are differences in the indicators that show the influence on the management performance of hotel companies, it was suggested that management performance can be increased by utilizing variables related to the cash holding ratio. Therefore, hotel companies will need to actively utilize cash assets apart from tangible assets belonging to non-current assets that are held and used for business. Although hotel companies operate based on non-current assets, it is necessary to establish various marketing strategies using cash assets in order to improve management performance. Managers need to make decisions to verify and manage the appropriate cash holding ratio.

Türkiye‘de Alabalık Yetiştiriciliği Yapan İşletmelerin Ekonomik Performanslarının Analizi

Bu çalışma, Türkiye‘de iç sularda alabalık yetiştiren işletmelerin faaliyetlerinin ekonomik performanslarını ölçmek ve alabalık yetiştiriciliğinin son yıllardaki gelişimini ortaya koymak amacıyla yapılmıştır. Araştırma sonucunda, işletmelerin kurulu kapasitelerinin ortalama %82‘sini kullandığı tespit edilmiştir. İşletme ölçeği ile KKO arasında negatif yönlü bir ilişki olup işletme ölçeği büyüdükçe KKO düşmektedir. İşletmelerin yem dönüşüm oranları ortalaması 1,12 olarak hesaplanmıştır. İşletmelerin aktif sermayeleri içerisinde en büyük payı balık sermayesi (%36,8), pasif sermaye içerisinde ise en büyük payı öz sermaye (%87,2) almaktadır. İşletmelerin bir ton üretim kapasitesine düşen net kârları; küçük ölçekli işletmelerde 2.374 TL, orta ölçekli işletmelerde 1.322 TL, büyük ölçekli işletmelerde ise 1.896 TL olarak hesaplanmıştır. İşletmelerin (küçük, orta, büyük) nispi kârları ortalaması sırasıyla 1,08; 0,99 ve 1,17‘dir. İncelenen işletmelerin ortalama cari oran değeri 3,67 ve likidite oranları ortalaması 3,55 olarak hesaplanmıştır. İşletme ölçeği büyüdükçe cari oran değerleri de artmakta, büyük ölçekli işletmeler küçük ve orta ölçekli işletmelere göre daha nakit varlıklara sahiptirler. Sonuç olarak Türkiye‘de alabalık yetiştiren işletmelerin; kısa vadeli borçlarını ödeyebilecek cari varlıklara sahip olduğu söylenebilir. İşletmelerin borçlanma oranı ortalaması 0,16‘dır. Eş deyişle Türkiye‘de alabalık yetiştiren işletmelerin sahip oldukları finansal varlıkların %16‘sı yabancı kaynaklardan karşılanmaktadır. İşletmelerin aktiflerinin devir hızı oranı ortalaması 0,79 olup sektör ortalamasının altındadır. İşletmelerin ekonomik rantabilitesi ortalama 0,13 olarak hesaplanmıştır. Eş deyişle işletmelerin yetiştiricilikten elde ettikleri gelir, fırsat maliyetinden daha fazladır.

Pertanggungjawaban Bank Dalam Perkara Tindak Pidana Pencucian Uang yang Tidak Menjalankan Prinsip Kehati-Hatian

Tindak Pidana Pencucian Uang yang dikenal dengan istilah money laundering merupakan proses dimana aset-aset pelaku terutama asset tunai yang diperoleh dari suatu tindak pidana dimanipulasikan sedemikian rupa sehingga aset tersebut seolah-olah berasal dari sumber yang sah. Bank sebagai lembaga penyedia jasa keuangan menjadi incaran dan sarana untuk melakukan tindak kejahatan termasuk tindak pidana pencucian uang. Adanya prinsip kehati-hatian bank salah satunya bertujuan untuk mencegah bank menjadi media tindak pidana pencucian uang, turunan dari prinsip kehati-hatian bank adalah prinsip mengenal nasabah yang telah berkembang menjadi prinsip customer due dilligence (CDD) dan enhanced due dilligence (EDD) wajib diterapkan oleh bank, kegiatan berupa identifikasi calon nasabah dan memantau karakteristik transaksi setiap nasabah, serta melaporkan apabila ada transaksi mencurigakan sesuai dengan peraturan perundang-undangan. tindakan bank yang tidak menjalankan prinsip tersebut akan dikenakan hukuman sebagaimana yang diatur dalam peraturan perundang-undangan mengenai prinsip mengenal nasabah. Maka seharusnya bank bertanggungjawab ketika tidak melaksanakan prinsip kehati-hatian bank berkaitan dengan upaya pencegahan tindak pidana pencucian uang.

Problems and ways to improve accounting for cash transactions

Money belongs to the category that has always been quite relevant in economic thought. Cash is considered the most liquid assets of the enterprise. Without their continuous cyclical movement, no business entity can function. In the current market conditions, most companies lack cash assets, so it is important to have the ability to rationally distribute and use them. To do this, it is necessary to properly organize the accounting of funds, constantly improve it, as well as be able to identify and solve problems that may arise when accounting for cash transactions. The purpose of the paper is to highlight the problems and develop proposals for improving the organization and methods of accounting for cash transactions. The paper considers the essence of cash assets, cash payments and cashless payments. The components of cash assets are described. The main problems concerning the system of organization and accounting of cash transactions are given. To eliminate the problematic issues that arise in the organization of cash flow accounting, ways to improve the accounting system in the field of cash management are proposed. The proposed measures to improve the organization of funds will provide an opportunity to improve the calculations and accounting of the enterprise, will facilitate the work of the accountant, optimize paperwork and improve analytical accounting.

Valuing of Liquidity Investment Value

This paper provides a solution to the problem of investment choice between cash and income-generating assets and also describes a possible approach to valuation the relative and absolute value of liquidity in such a situation.

GDP-Linked Bonds as a New Asset Class

We show that GDP-linked bonds can provide diversification benefits to investors. We use a stochastic spanning methodology which makes no assumptions on the distributional characteristics of the returns of these innovative instruments and apply to test both floaters and linkers. We find that both types of GDP-linked bonds are not spanned by a benchmark set of stocks, bonds, and cash assets, thus providing a new asset class. Spanning is ruled out for a wide and reasonable range of bond design parameters. In out-of-sample testing we find significant diversification benefits for investors, with strongly statistically significant increases in Sharpe ratios in the range 0.10-0.43 for floaters and 0.05-0.17 for linkers over an optimal benchmark portfolio. The results for linkers depend on the risk premium that these instruments will trade, while floaters are less sensitive to the premium, but the benefits remain for the range of premia estimated in existing literature. Our finding are further explained by documenting the finance and macro factors that drive the performance of GDP-linked bonds, using generalized method of moments regressions.

Firm Attributes, Corporate Fundamentals and Investment Strategies: An Empirical Study for Indian Stock Market

We combine corporate attributes and fundamental factors for evolving different investment strategies using data from 200 companies listed in the National Stock Exchange (NSE) from 2005 to 2018. The results indicate the existence of equity market anomalies based on size, volume, earnings, cash flow variability, asset growth, price momentum, price-to-book ratio and profitability. The performance of trading strategies is sensitive to portfolio construction procedure, that is, forming 5/10/20 portfolios. Bivariate strategies generally perform better than univariate strategies in the Indian context. On an overall basis, the size-based strategy performs best with a mean excess return of 3.63 per cent per month. We further find that corporate fundamentals such as profitability, operating efficiency, liquidity, solvency, innovation and entry barriers help in filtering poor future performers that may have been recommended by attributes-based strategy. Our filtered portfolios based on firm attributes and corporate fundamentals outperform unfiltered portfolios, and their returns are not explained by multi-factor performance benchmarks.

OWNERSHIP STRUCTURE, FREE CASH FLOW, ASSET STRUCTURE AND DIVIDEND POLICY ON DEBT POLICY

This study is designed based on problems related to debt policy. The debt policy in every company has a direct effect on the financial position. The use of debt that which too high provides great risk, but if the companies are able to manage debt properly; then the use of debt shall increase profits for shareholders. The purpose of this study was to determine and analyze the effects of managerial ownership, institutional ownership, free cash flow, assets structure, and dividend policy on companies indexed LQ-45 wich listed on the Indonesia Stock Exchange. The sampling technique of this study is purposive sampling which produced 85 observations. This study uses secondary data in the form of annual reports. The tool of analysis of this study is multiple regression with support of statistical package for social scientists (SPSS) software. The results show that: (1) managerial ownership has no effect on debt policy; (2) institutional ownership has a negative effect on debt policy; (3) free cash flow has a negative effect on debt policy; (4) assets structure has a negative effect on debt policy and (5) dividend policy has no effect on debt policy.

Audit of cash assets: organization, problems and improvement

Money belongs to the category that has always been very relevant in economic thought. Cash is considered the most liquid assets of the enterprise. Under current market conditions, most businesses lack cash assets, so it is important to rationally distribute and use them. To do this, it is necessary to properly organize the accounting and audit of funds. It should be noted that in the course of work the cashier can commit irregularities that in the future lead to significant penalties. Thus, the audit of cash and bank transactions helps to establish the legality and reliability of the performed money transactions and their correctness in accounting, to detect mistakes and abuses during such transactions. The purpose of the paper is to highlight the organizational and methodological aspects of conducting audit of cash assets, to identify the main problems that arise in the audit of money transactions, and to provide recommendations for their resolution. The audit of cash assets plays a significant role in determining the financial position of an entity. Based on the results of the audit of cash assess customers can assess the effectiveness of spending their money. Unfortunately, there may be issues that need to be addressed in the course of organizing and conducting the audit. There are many abuses and irregularities in the conduct of money transactions that the auditor needs to effectively identify. Therefore, resolving these issues and improving the audit of cash assets is very relevant.

IMPROVEMENT OF THE METHOD OF ANALYSIS OF ASSET MANAGEMENT EFFICIENCY

Assets are the key factor in the financial well-being of a business (the financial health of a business). Their composition and efficiency of use directly influence the end result of the enterprise's economic activity. Effective asset management can improve financial sustainability and increase the competitiveness of an enterprise. Therefore, in order to ensure financial sustainability and competitive advantage in the long run, it is necessary to address the challenge of continuous improvement in asset management. Financial analysis is an important tool for substantiating and controlling asset use decisions. As the turnover and return on assets depend to a large extent on the particularities of the industry and the conditions of business, the means of financial analysis must be tailored to specific situations. Therefore, the issues of improving the methods of financial analysis that would take into account the peculiarities of the activity of the enterprise are urgent. The purpose of this study is to substantiate a methodological approach to the analysis of asset utilization of Ukrainian bakeries. The methodological basis of this study is a system-based approach to solving the problems of analytical asset management. In generalizing the methodological principles of financial analysis of asset management effectiveness, techniques of abstract-logical method are used, namely: analysis and synthesis, induction and deduction, analogy and comparison. There were used methods of average and relative values, methods of modeling and factor analysis to make all the calculations; they were used to establish the relationship between the systems of financial indicators of asset efficiency. The calculation of the indicators of profitability and asset utilization in turnover was made according to the financial statements of Ukrainian bakeries. Asset management is aimed at increasing the efficiency of their use, the main generalization of which is the return on assets. The need to improve the methodology for analyzing the return on assets is due to the limited use of this indicator in the analysis of unprofitable enterprises on the one hand, and, on the other hand, to the need to take into account the specifics of the industry where the enterprise operates. Under conditions of loss, the asset return indicator distorted reflects the impact of its change factors, and industry features are reflected in different turnover rates of individual components of assets, and accordingly, in different intensity of their impact on profitability. The proposed approach is based on a multifactorial model that reflects the dependence of the asset on return to sales, non-current assets to sales, inventory to sales, accounts receivable to sales and cash assets to sales. The model determines the intensity of the impact on the return on assets of the partial indicators of the assets to sales. The calculations were made by a group of bakeries from different regions of Ukraine. As a criterion for assessing the effectiveness of asset management, it is proposed to use the average growth rate of partial indicators of the model of return on assets, which is determined taking into account the intensity of their impact. The specifics of the approach are more focused not on absolute indicators, but on indicators of dynamics, on the identification of trends. The advantage of the proposed indicator is the ease of interpretation, especially for the case of loss-making, which is peculiar for one third of the enterprises of the industry.

The long-term effects of cancer survivorship on household assets

BackgroundLess is known about the impact of cancer on household assets and household financial portfolio during which cancer survivors face higher mortality risk. Economic theory predicts that cancer survivors would deplete their wealth in such a way that meets immediate financial needs for treatment and that hedges the risk of anticipated medical expenses associated with recurrence. Building upon this prediction, we examine long-term changes in household assets in response to cancer diagnosis among middle-aged and elderly Americans (age ≥ 50).ResultsUsing the 2000–2014 waves of the Health and Retirement Study, we estimated the household fixed effects regression that regresses household assets on time elapsed since cancer diagnosis (≤ 2 years, > 2 but ≤4 years, > 4 but ≤6 years, and > 6 but ≤8 years). Regression estimates were adjusted for demographic characteristics, general health condition, employment outcomes, and household economic attributes. Household assets were measured by total net worth as well as the amount of savings held in each asset category. The loss of household assets attributable to cancer was estimated to be $125,832 in 2015 dollars per household with a cancer patient. This change came from statistically significant reductions in investment assets, miscellaneous savings, real estate equity, and business equity, and increases in unsecured debt. We also found 17.2–28.0% increases in cash and cash-equivalent assets from + 2 years since diagnosis through the rest of the study periods. The accumulation of cash was observed for both the well-insured group (multiple coverages) and those with limited insurance (single coverage).ConclusionsThe results showed evidence of both asset depletion and precautionary accumulation of liquid assets among cancer survivors, which reduces risk exposure of household financial portfolio. Our findings highlighted that household asset is an important source of liquidity to finance cancer care and to absorb the expected expenditure risk associated with cancer recurrence. We also showed that health insurance provides limited coverage of health risks associated with cancer.

Do Pension Funds Manage Cash Efficiently?

Using unexplored data on Swiss pension funds, we study whether pension funds manage their cash efficiently. While a share of cash is held to meet certain operational and investment needs, the remaining is accumulated from past activity and slowly invested. Most of the variation observed in pension fund cash holdings is, however, attributable to pension fund-specific time-invariant factors rather than to differences in pension funds’ needs. We estimate that pension funds with excessive cash holdings hold an average of 8.4% of total assets in excess cash. Investing this excess cash in a representative portfolio of assets could translate into an additional expected annual return of 30 basis points. Furthermore, we show that pension funds in a deccumulation phase, as well as large pension funds, are more efficient in managing their cash and that the introduction of negative interest rates by the Swiss National Bank triggered a systematic reduction in pension fund cash holdings.

Economic policy uncertainty and dividend sustainability: new insight from emerging equity market of China

We examine the influence of Economic Policy Uncertainty (E.P.U.) on dividend sustainability – dividend termination and dividend initiation decision. Using a sample of 1,375 firms over the time span 2000–2015, our main result reveals that during high E.P.U. past dividend payers are more likely to terminate and past non-payers are less likely to initiate dividends. However, firms that rely more on internal finance (I.F.), generate high return on invested capital (R.O.I.C.) and state-owned enterprises (S.O.E.s) are less exposed to E.P.U. Therefore, negative (positive) effect of E.P.U. on firms’ dividend initiation (termination) decision is mitigated by considering firms’ heterogeneous characteristics. Results also show that firms having high asset growth, maturity, profitability, cash holdings and high firm value are more likely to initiate and less likely to terminate dividend during period of high E.P.U. In addition, effects of E.P.U. on dividend sustainability is higher for firms functioning in high marketised areas relative to low marketised groups. These findings are robust under different robustness check. Finding confirms that transparent and stable implementation of economic policies can improve sustainability of firm’s dividend policy.

Security Design in Non-Exclusive Markets with Asymmetric Information

We revisit the classic problem of a seller (e.g. firm) who is privately informed about her asset and needs to raise funds from uninformed buyers (e.g. investors) by issuing securities backed by her asset cash flows. In our setting, buyers post menus of contracts to screen the seller, but the seller cannot commit to accept contracts from only one buyer, i.e., markets are non-exclusive. We show that an equilibrium of this screening game always exists, it is unique and features semi-pooling allocations for a wide range of parameters. In equilibrium, the seller tranches her asset cash flows into a debt security (senior tranche) and a levered-equity security (junior tranche). Whereas the seller of a high quality asset only issues her senior tranche, the seller of a low quality asset issues both tranches but to distinct buyers. Consistent with this, whereas the senior tranche is priced at pooling valuation, the junior tranche is priced at low valuation. Our theory's positive predictions are consistent with recent empirical evidence on issuance and pricing of mortgage-backed securities, and we analyze its normative implications within the context of recent reforms aimed at enhancing transparency of financial markets.

Building a Better Portfolio

Investors have been increasing their allocations to private assets seeking higher returns and better portfolio diversification. However, as this allocation increases, the liquidity characteristics of their portfolios change. To address this issue we create a framework that links bottom-up private asset investing with top-down asset allocation. Private asset cash flows are consistently modeled together with public asset returns and risk that, in turn, drive portfolio construction. This helps investors analyze how allocations to illiquid private assets, in combination with their commitment strategy, may affect their portfolio’s ability to respond to various liquidity demands. By measuring the potential tradeoff between asset allocations, total portfolio performance and the frequency of certain liquidity events with different severities, this framework can help investors quantify the interaction between their portfolio structure and performance, and formalize their decision making around portfolio liquidity choices.

Türkiye Muhasebe Standartlarına Göre İşletmelerin Nakit Akış Profillerinin BİST 100 Endeksi Üzerinde Analizi (BIST 100 Index on Analysis of Cash Flow Profiles of Firms in Accordance With Accointing Standards in Turkey)

Purpose – With the use of accounting standards in our country, it is necessary to prepare cash flow statements in accordance with the standards. Turkey Accounting Standard 7 Cash Flows (IAS 7) is by prepared with cash flows operating, operating cash flow model from operations was analyzed by some proportions used in the cash flow ratio analysis factors increasing cash flow of the enterprise will be initially detected. Design/methodology/approach – In our study, first of all, a conceptual framework was a established. After that, the literature review was done and the rates that could be used were determined. Findings – A significant result was found between asset cash returns and equity returns. The marginal effects of these variables arising from the main activities of the enterprises are also examined. Accordingly, the cash flow of 50 firms covering the 2009-2018 periods subject to the Bist 100 index are analyzed and a simple logistic regression model is used Stata-14. Discussion – The cash flows companies from the main operations cause an increase in the effective use of assets and equity.

Does the monitoring effect of Big 4 audit firms really prevail? Evidence from managerial expropriation of cash assets

This study pins down the monitoring effect of Big 4 versus non-Big 4 audit firms on shareholder wealth by exploring the dollar equivalent of the reduction in shareholder value arising from managerial expropriation of cash assets. We detect a value discount of $0.12 for a dollar of cash assets held by non-Big 4 clients, while we uncover a value premium of $0.09 for an extra dollar of cash reserves in Big 4 clients. We further observe that second-tier auditors underperform their Big 4 rivals in containing managerial expropriation of corporate liquidity. Moreover, the economic consequences of cash and cash equivalents increase with a switch from a non-Big 4 firm to a Big 4 firm. Our results survive examinations of excessive cash assets, propensity score-matching analysis, a vast array of controls, and alternative valuation models. Collectively, our results suggest that Big 4 auditors tend to play a significantly stronger role vis-a-vis their non-Big 4 rivals in deterring managers from expropriating outside shareholders through cash resources.