Cash Deficit Research Articles

Walking up the Down Escalator: Public Investment and Fiscal Stability

When growth-promoting spending is cut so much that the present value of future government revenues falls by more than the immediate improvement in the cash deficit, fiscal adjustment becomes like walking up the down escalator. Although short-term cash flows matter, too tight a focus on them encourages governments to invest too little. Cash-flow targets also encourage governments to shift investment spending off budget by seeking private investment in public projects, irrespective of its real fiscal or economic benefits. To deal with this problem, some observers have suggested excluding certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals) from cash-flow targets. These stopgap remedies may help protect some investments, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and, where appropriate, including such measures in fiscal targets or even fiscal rules.

What Drives Corporate Liquidity? An International Survey of Cash Holdings and Lines of Credit

We survey CFOs of public and private firms in 29 countries about aspects of corporate liquidity that cannot be obtained from publicly available data. We find that lines of credit are very important liquidity instruments relative to cash holdings. The median line of credit is equal to 15 percent of book assets whereas cash holdings comprise only 9 percent of book assets. Of these cash holdings, the fraction held as non-operational cash (rather than held for day-to-day operations) is only about 40% of the total. Cash and lines of credit are held for different purposes. Lines of credit, which represent options on liquidity, are strongly related to a firm's need for external financing to fund future investment opportunities. Non-operational cash, which constitutes realized liquidity, is not related to future external financing needs and is primarily held as a general buffer against future cash shortfalls. Across countries, firms make greater use of lines of credit, but not excess cash, when external credit markets are poorly developed.

Cash shortfall threatens 18,000 health jobs, says RCN

Cash shortfall threatens 18,000 health jobs, says RCN

Training funds sacrificed for sake of budgets, say nursing schools

Heads of university nursing schools claim strategic health authorities (SHAs) are raiding nurse training budgets to reduce NHS cash deficits.

How Sensitive are Japanese Firms to Earnings Risk? Evidence from Cash Holdings

We investigate the hypothesis that cash balances have a precautionary motive and serve to mitigate the volatility of operating earnings, which we use as a proxy for risk. Our results show that cash holdings are positively associated with firm level risk, but negatively related to industry risk. Consistent with previous findings, cash holdings are decreasing with the firm's size and debt ratio, and increasing with its profitability, growth prospects, and dividend payout ratio. The precautionary motive for holding cash is investigated by analyzing different cases under which cash shortfalls have different cost implications. The results show that keiretsu affiliated firms hold less cash and are less risk sensitive. There is also evidence that financial constraints reduce the incentives to mitigate earnings risk. Finally, we show that bank-controlled firms and highly leveraged firms increased their sensitivity to earnings volatility as the condition of Japanese banks deteriorated after 1998. Overall, our results strongly support the precautionary motive for holding cash and underline the importance of corporate risk mitigation.

G8 cash shortfall leaves AIDS fund in ‘terrible trouble’

G8 cash shortfall leaves AIDS fund in ‘terrible trouble’

Plans to track tuna canned amid claims of cash shortfall

Conservationists fear overfishing will kill off bluefin tuna.

Weaving Wages, Indebtedness, and Remittances in the Nepalese Carpet Industry

The persistence of reports about child labor exploitation in the Nepalese carpet industry, particularly by adults who control their weaving wages, begs an account of how carpet-weaving labor is recruited, remunerated, and reproduced. A study of union and nonunion carpet weavers found that most young weavers were not victims of traditional forms of debt bondage and coercive control, but working conditions often led to high levels of indebtedness. Salary advances (peskii) allowed weavers to compensate for cash shortfalls and meet unusual expenses, but some weavers have been able to remain in control of this salary advance system. Remittances to families have also been associated with weaving wage exploitation, as well as subsidies to the weaver’s parental household. Recently, the collapse of the Nepalese carpet industry—in part due to persistent child labor reports—has meant that wages do not keep up with urban living costs, increasing weaving debt and undermining the ability to make remittances. Young Nepa...

Notes from the Editors, July 2001

» Notes from the EditorsAs many of you know, we sent out an emergency appeal two months ago to raise $100,000 to make up for a cash deficit. We found ourselves in the paradoxical position of having experienced the largest increase in magazine circulation last year in more than a decade, while looking at a bank account that was pointing toward empty. MR's very existence was threatened. The problem arose in part because we were without an editor for MR Press for over a year. As a result, book schedules were delayed and new projects put on holdThis article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

Social Entrepreneurship: Managerial, Finance and Marketing Aspects

SUMMARY Nonprofit organizations are being urged to take a more “businesslike approach” to their operations, and to add earned income ventures to offset cash shortfalls due to lower donation or grant and contract revenue.1 This “social entrepreneurship” impetus started around 1980, grew rapidly in the late 1980s, and continues to accelerate in the new millennium. Entrepreneurial ventures are not only seen in commercially-oriented health care, arts, and education organizations, but churches, youth organizations, soup kitchens, and other donative non-profits. This article introduces the field of social entrepreneurship, surveys major contributions from the leading thinkers, and spotlights key managerial, finance, and marketing issue.

Paper tigers?: A model of the Asian crisis

This paper develops an interpretation of the Asian meltdown focused on moral hazard as the common source of overinvestment, excessive external borrowing, and current account deficits. To the extent that foreign creditors are willing to lend to domestic agents against future bail-out revenue from the government, unprofitable projects and cash shortfalls are re-financed through external borrowing. While public deficits need not be high before a crisis, the eventual refusal of foreign creditors to refinance the country's cumulative losses forces the government to step in and guarantee the outstanding stock of external liabilities. To satisfy solvency, the government must then undertake appropriate domestic fiscal reforms, possibly involving recourse to seigniorage revenues. Expectations of inflationary financing thus cause a collapse of the currency and anticipate the event of a financial crisis.

Http://journal.ru.ac.za/index.php/sajog/article/view/128

In January 1998 hundreds of thousands of pensioners in the Eastern Cape Province were left destitute when a cash shortfall prevented the provincial Department of Welfare from paying out old-age pensions. The Eastern Cape has a history of problems which include backlogs in infrastructure, a lack of administrative capacity, and fraud and corruption. Pensioners were short-changed when government began the lengthy process of streamlining the South African pensions system. The communication draws on press reports covering the period 1997 and 1998, to trace the events which led to the pensions crisis and the background to these events. With the benefit of hindsight, the fiasco highlights the significance of pensions in a rural economy and strong popular reactions to the temporary withdrawal of government transfers to the elderly.

Effectively Costing Out Options

Physicians who received medical training during the early days of Medicare may recall when patients with newly diagnosed uncomplicated diabetes and hypertension were admitted for leisurely workups. Disputing the attending physician's decision to transfer a patient to the intensive care unit for "observation" may have succeeded only in incurring his or her warth—the issue of cost was seemingly irrelevant at the time. Cost-effectiveness not taught on rounds. See also p 1172. That medical education milieu likely did not preprare many of today's clinicians for making decisions about medical care costs, and caring for patients' needs more appropriately the physician's first concern. How infuriating it is to have expended considerable mental and emotional resources in a difficult case, only to be second-suggestand badgered about the cost by an insurance company or utilization reviewer. However, the reality is that cost has to be dealt with. For example, based onrojections put forth by federal analysts, Peterson¹suggests that if program operations continue as currently, by the year 2030, there will be a combined cash deficit of $1.7 trillion for Medicare Hospital Insurance and Social Security.

Nurses face possible redundancy as Highlands trust runs up huge deficit

Nurses’ jobs could be at risk as a result of a £1.8 million cash deficit, the Highland Communities NHS Trust in Inverness confirmed last week.

Jobs cuts to make good cash shortfall

Jobs cuts to make good cash shortfall

News

A mass meeting of nearly 150 nurses and other health staff protesting about redundancies at lister Hospital, Hertfordshire, last week were addressed by local union officers, lip to 37 I) D to H grade nursing posts are to be axed as North Hertfordshire NHS Trust attempts to make up a cash shortfall of £1.7 million.

Cash shortfall for care objectives.

Only one fifth of the actual money needed to meet objectives in residential care may be forthcoming from Government, David Tombs, social services director for Hereford and Worcester County Council, claimed last week.

Abstract: Short-Term Financial Planning under Uncertainty

The essence of short-term financial planning is to determine an asset and liability mix that minimizes the cost of financing the firm's cash surpluses and deficits over the planning horizon. Seasonal and other effects cause uncertainty in forecasted cash requirements, liquidation, and termination costs. We develop a stochastic linear programming model that is computationally feasible for a firm's financial planning over several periods with all three types of uncertainty when there is a rich structure over the set of possible asset choices. The models' solution is facilitated using a recent novel algorithm for finitely distributed simple recourse SLPR problems developed by Wets and coded by Collins, Kallberg and Kusy. The algorithm uses a “working basis” that has the same dimension as the corresponding (approximate) “mean” linear program.

Systems Dynamics and Cash Flow Planning—A Model for Accountants

This paper aims to explore the applicability of Systems Dynamics Methodology (SDM) to the formulation of long‐range cash flow policies. It also explains how the information generated from the model aids in understanding the behaviour of cash flow through time and helps in determining cash deficits, excess cash, including timing, and the contruction of cash budgets under different cash control policies. After a brief introduction which explains the basic ideas behind SDM, the structure of the model is developed and described and the results of a hypothetical example analysed. This is followed by some comments on practical aspects of implementing the model in real life and its potential for cash flow planning and control.

Systems Dynamics and Cash Flow Planning‐A Model for Accountants

This paper aims to explore the applicability of Systems Dynamics Methodology (SDM) to the formulation of long‐range cash flow policies. It also explains how the information generated from the model aids in understanding the behaviour of cashflow through time and helps in determining cash deficits, excess cash, including timing, and the contruction of cash budgets under different cash control policies. After a brief introduction which explains the basic ideas behind SDM, the structure of the model is developed and described and the results of a hypothetical example analysed. This is followed by some comments on practical aspects of implementing the model in real life and its potential for cash flow planning and control.