Cash Flow Deficit Research Articles

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

This paper explores the relationship between cash flow and capital investment of a firm. Using a panel of Nigerian publicly quoted firms in the services and consumer goods sectors, we found that cash flow is insignificantly related to capital investment. This observed insignificant relationship is stronger in episodes where we have a sub-sample of younger firms. The younger firms recording insignificant relationships revealed that these firms cannot easily access external funds when there is a cash flow shortfall because of their low level of experience in their socio-economic networks. On the evidence of older firms, the study shows that when there is a cash flow shortfall for older firms, these firms may face difficulties in financing their investment with internal sources of funds; though, these firms can easily access external funds because of their level of experience in socio-economic networks. The results provide support that internal and external sources of funds can be substituted perfectly for experienced firms.

At‐the‐market equity offerings and cash flow shortfalls: Evidence from real estate investment trusts

AbstractThis article examines how access to at‐the‐market (ATM) equity offering programs can help mitigate the adverse effect of temporary cash flow shortfalls on firm performance. Using asset‐level exposure to the spread of COVID‐19 as a proxy for a REIT's sensitivity to a future operational cash flow shock, we find that ATM program access reduces the magnitude of the negative performance effect by nearly 70%. We extend our analysis outside of the pandemic period to provide further evidence of the broader importance of ATM program access as an important source of financial flexibility during more general periods of cash flow uncertainty.

Analysis of Return on Investment Associated with Changes in Operational Time in the Construction of the Sigli-Banda Aceh Toll Road

The problem with this research is that the government was late in land acquisition, so that PT. Hutama Karya (Persero) as the concession holder in the implementation of toll road construction is constrained in a number of locations. This study aims to determine the impact of delays in land acquisition and implementation of the construction of the Sigli-Banda Aceh Toll Road on net profit and return on investment at the end of the concession period. This study uses a quantitative method approach. Data analysis techniques use Present Net Value (NPV), Internal Rate of Return (IRR), and sensitivity analysis. The results of the study show that delays of 1, 2, and 3 years have an impact on concessionaires going through cash flow deficit periods of 17, 19, and 20 years and surplus cash flow periods of 23, 21, and 20 years. year, where investment returns occur in the 32nd (2050), 34th (2052) and 36th (2054) years, so that at the end of the concession period, the net profit that can be achieved by the concession holder is with an NPV value of Rp. 9,162,336,077,086, Rp. 6,858,784,951,438 and Rp. 4,680,164,756,915. If there are no delays, then the concessionaire only needs to go through a cash flow deficit period of 16 years and a cash flow surplus period of 24 years, where the return on investment capital occurs in year 30 (2048), so that the net profit that can be obtained by the concessionaire is with an NPV value of Rp. 11,647,590,651,181.

Research on the impact of corporate governance on enterprise bankruptcy risk

This article research on how corporate governance affects enterprise bankruptcy risk from the perspective of decision-making, audit management and risk prevention. This article analyses the results in multiple cases to analyse the bankruptcy of a company due to corporate governance issues. This research discusses the following three points. First, directors’ decisions play a crucial role in the company’s operations. Second, managers must conduct audit management of the company because staff members may ignore accounting standards and implement accounting fraud, making false descriptions of income and expense omissions. Third, risk prevention requires directors to accurately assess conflicts of interest, long-term contracts and participation risks, and future cash flow shortfalls when the company faces legal risks.

Show Me (More) Than the Money! What You Need from Your Billing Partner in 2022 and Beyond

Features| May 2022 Show Me (More) Than the Money! What You Need from Your Billing Partner in 2022 and Beyond James Lineberger, PhD, MHA, FACMPE, FACHE James Lineberger, PhD, MHA, FACMPE, FACHE Search for other works by this author on: This Site PubMed Google Scholar ASA Monitor May 2022, Vol. 86, 31. https://doi.org/10.1097/01.ASM.0000830844.59305.ca Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Share Icon Share Facebook Twitter LinkedIn MailTo Cite Icon Cite Get Permissions Search Site Citation James Lineberger; Show Me (More) Than the Money! What You Need from Your Billing Partner in 2022 and Beyond. ASA Monitor 2022; 86:31 doi: https://doi.org/10.1097/01.ASM.0000830844.59305.ca Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll PublicationsASA Monitor Search Advanced Search Topics: billing and payment, money This article outlines why anesthesiologists may consider partnering with a service to outsource their billing function and also discusses what is needed from such a partnership. It will review the billing process as well as list the metrics traditionally used to monitor the performance of the billing function. The term “billing” is expanding and might be better represented by the phrase “revenue cycle” due to an expansion into other operational areas of the practice. Finally, the article will describe how anesthesiologists can evaluate potential partners. Effectively billing for anesthesia services is vital. Revenue from patient services provides the income to pay expenses. Lacking a billing function that accurately and quickly results in payment may result in a cash flow shortfall that could impact financial viability. Calculating the gross charge for anesthesiology services itself is complicated and unique from other medical specialties, requiring knowledge of current rules and regulations, along with... You do not currently have access to this content.

SUSTAINABILITY AND GROWTH OF SMALL-SCALE ONLINE RETAIL BUSINESS OWNERS FROM SANTIAGO CITY

The Covid-19 Pandemic hampered the growth and sustainability of small-scale online businesses. Companies were forced to devise strategies that would allow them to survive the economic downturn. The complex issue of small business growth necessitates further investigation. This study looked into the sustainability and growth of small-scale online retail businesses. This study used a qualitative research, particularly, phenomenology conducted at Santiago City, Philippines. The participants were twelve (12) purposively selected small-scale online retail business owners. The research study involved face-to-face, semi-structured interviews. The open-ended nature of the questions allowed the participants to express their personal experiences. The themes which arose from the experiences and factors associated with the sustainability and growth of small-scale online business owners are linked with the following themes: establishing the business name, knowing whom to do the business with, resorting to online business, decision-making is well-planned, the going still gets tough, uncertainties in financial management, poor access to finance and customer relationship related themes. The themes which depict the challenges and coping mechanisms of the entrepreneurs are also presented. The entrepreneurs employed strategies aligned with contingency management and they relied to their skills and knowledge in running their business in order to attain sustainability and allow the firm to grow. The retail business owners have gone through financial difficulties such as cash flow shortfall, scarce fund and unforeseen reparation, more so challenged by cut-throat competition. And in order to cope, the entrepreneurs enforced the entity’s unique selling proposition, financial management and cultivated a steadfast mindset.

Cash holdings and oil price uncertainty exposures

This paper investigates the role of cash holdings in controlling the negative risk from oil price uncertainty. We develop a dynamic model and find that firms with oil-linked assets in place are more likely to experience cash flow shortfalls, which affect their future investments and lead to additional costs and losses. We define these potential costs and losses as negative oil price uncertainty exposures. Firms with negative oil price uncertainty exposures must hold cash in case such costs and losses are realized. Further analysis shows that the relationship between oil price uncertainty exposures and cash holdings is heterogeneous with respect to firm-specific characteristics. An additional unit of cash holding is more valuable to firms with severe financial constraints or low existing liabilities because it increases the firm's ability to counter the adverse effects of oil price uncertainty. Using a sample of all non-state-owned, A-share listed manufacturing firms in China from 2008 to 2018, we find data that support the implications of our model.

Profitability, risk and cash flow deficit for beginning cow–calf producers

PurposeThe purpose of this study is to estimate the amount of cash flow deficit, if any, needed to maintain the operating costs and service debt of a startup cow–calf enterprise. The study compares long-term profitability and risk between starting small and building a herd to full carrying capacity or by starting at desired herd capacity.Design/methodology/approachA dynamic cattle growth model was developed to capture expanding and maintaining the desired herd size. Discounted cash flow (DCF) models over a 15-year period were calculated to estimate net present value (NPV), modified internal rate of return (MIRR) and cash flow deficit to keep the business operating and service debt. Simulation analyses were conducted considering price and production risk.FindingsStarting at the desired herd size was preferred, according to NPV/MIRR and cash flow deficit, but the differences were not substantial. Assuming the operation is liquidated at book values, there was a 36.3% probability of this enterprise having a zero or positive NPV. If the conservative terminal value assumption is relaxed up to feasible market values, the cow–calf enterprise is economically attractive at an estimated 2.4% opportunity cost of capital. However, the producer would experience a cash flow deficit during the first seven years, which was simulated to be $14,892 and $15,985 annual for both strategies.Originality/valueInnovative methods used in this study include varying the annual opportunity cost of capital as a function of financing decisions, stochastic prices by cattle type and stochastic weaning weights that are a function of a dynamic cattle model.

Six Sigma for improving cash flow deficit: a case study in the food can manufacturing industry

Purpose Cash flow deficit situations and working capital control are major challenges for many companies, especially those whose suppliers and clients have strong bargaining power. This study aims to describe the application of the Six Sigma methodology for solving these problems in a large German food can manufacturing company. Design/methodology/approach This paper follows the qualitative methodology of case study research. During different define, measure, analyse, improve and control process phases, the problem and critical aspects are identified to improve the quality of the payment process and improvements are suggested and implemented. Findings The results provide evidence of how Six Sigma can be useful in administrative–financial processes that are carried out within a company. This result is particularly interesting because it is about processes that have not applied Six Sigma methodology. For the company studied, this methodology has balanced its cash flow and this meant large amounts of savings, especially in bank interest to avoid having to ask for bank credits. Originality/value This case can be extrapolated to other companies, regardless of the company size, that present similar symptoms of cash deficit, especially if their bargaining power with suppliers and customers is low.

The Forecasting Express-Model of the Energy Companies’ Financial State

The paper focuses on a forecasting express-model of the financial state of an enterprise. This model includes forecasting the Profit&Loss statement and the Balance Sheet of the organization. The combination of these documents allows forecasting cash flow in an indirect form. We use open data on the financial statements of individual organizations. Estimates of the cash flow deficit have been carried out both for the power generation sub-sector as a whole and for the largest power generating organizations in Russia.

Dividend and Investment Decisions of Indian Corporate Firms Under Cash Flow Uncertainty

The Miller–Modigliani theory proposed that in perfect capital market, dividend and investment decisions are mutually separable, which is commonly known as the “separation principle.” On the basis of this theory, this article tries to investigate the dividend–investment relationship from a new perspective by introducing the cash flow uncertainty. This cash flow uncertainty is measured by cash flow shortfall and cash flow volatility. Using firm-specific data on relevant variables of the BSE-listed firms from 2001 to 2015, this article tries to explore the instruments which help to resolve cash flow uncertainty of the firm. Classifying firms into quintiles and dividing them into positive and negative shortfalls on the basis of both the measures of cash flow uncertainty, our main results show that firms mainly use external financing to resolve cash flow uncertainty. However, cash drawdown plays a trivial role in mitigating shortfalls. Moreover, applying the linear panel data estimation, the relationship between dividend and investment is explored for firms having a positive cash flow shortfall, using both measures of cash flow uncertainty. Our results reported that firm’s investment decision has no impact on dividend decision and vice versa. Hence, dividend and investment choices are made independently under cash flow uncertainty. Thus, our results support the “separation principle” under cash flow uncertainty.

The Development of a Fuzzy Logic System in a Stochastic Environment with Normal Distribution Variables for Cash Flow Deficit Detection in Corporate Loan Policy

This paper develops a Mamdani fuzzy logic system (FLS) that has stochastic fuzzy input variables designed to identify cash-flow deficits in bank lending policies. These deficits do not cover the available cash-flow (CFA) resulting from the company's operating activity. Thus, due to these deficits, solutions must be identified to avoid companies' financial difficulties. The novelty of this paper lies in its using stochastic fuzzy variables, or those categories of variables that are defined by fuzzy sets, characterized by normally distributed density functions specific to random variables, and characterized by fuzzy membership functions. The variation intervals of the stochastic fuzzy variables allow identification of the probabilistic risk situations to which the company is exposed during the crediting period using the Mamdani-type fuzzy logic system. The mechanism of implementing the fuzzy logic system is based on two stages. The first is based on the determination of the cash-flow requirements resulting from loan reimbursement and interest rates. This stage has the role of determining the need for financial resources to cover the liabilities. The second stage is based on the identification of the stochastic fuzzy variables which have a role in influencing the cash flow deficits and the probability values estimation of these variables taking into account probability calculations. Based on these probabilistic values, using the Mamdani fuzzy logic system, estimations are computed for the available cash-flow (the output variable). The estimated values for CFA are then used to detect probability risk situations in which the company will not have enough resources to cover its liabilities to financial creditors. All the FLS calculations refer to future time periods. Testing and simulating the fuzzy controller confirms its functionality.

Capital Requirements in a Quantitative Model of Banking Industry Dynamics

We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on bank risk taking, commercial bank failure, and market structure. We propose a market structure where big, dominant banks interact with small, competitive fringe banks. The paper extends our previous work by letting banks accumulate securities like treasury bills and to undertake short-term borrowing when there are cash flow shortfalls. A nontrivial size distribution of banks arises out of endogenous entry and exit, as well as banks' buffer stocks of securities. We find that a 50% rise in capital requirements leads to a 45% reduction in exit rates of small banks and a more concentrated industry. Aggregate loan supply falls by 8.71% and interest rates rise by 50 basis points. The lower exit rate causes the tax/output rate necessary to fund deposit insurance to drop in half. Higher interest rates, on the other hand, result in a higher default frequency as well as a lower level of intermediated output. We also use the model to study the effect of lowering the rate different sized banks are charged when borrowing on their lending behavior studied by Kashyap and Stein (2001).

Global cash flow sensitivities

We examine the role of a country's institutional framework for investment and financing activities. A country's financial structure, investor rights, and legal environment are important determinants of the relation between cash flow and firms’ investment and financing behavior. Firms from countries with a stronger institutional framework exhibit higher financing-cash flow sensitivities. These firms are more likely to substitute a cash flow shortfall with issuing equity. Conversely, investment-cash flow sensitivities are higher for firms in countries with a weaker institutional framework.

Global Cash Flow Sensitivities

We examine the role of a country’s institutional framework for investment and financing activities. A country’s financial structure, investor rights, and legal environment are important determinants of the relation between internal cash flow and firms’ investment and financing behavior. Firms from countries with a more developed institutional framework exhibit higher financing cash flow sensitivities. These firms are more likely to substitute a cash flow shortfall with equity issues. Conversely, firms’ investment-cash flow sensitivity is higher in countries with a less developed institutional framework.

Accounting for the Corporate Cash Increase

Why do U.S. firms hold much more cash now than they did 30 years ago? I construct an industry equilibrium model of firm dynamics where cash provides a buffer against cash-flow shortfalls in the presence of costly external finance. My model finds that 63% of the increase in corporate cash holdings of small public firms can be accounted for by the increase in cash flow volatility. The increase in cash flow volatility observed in the data arises from a decrease in the correlation between revenue and operating expenses. The model has a corresponding correlation parameter between the shocks on revenue and operating expenses and only this parameter is changed in the primary experiment. In addition, the model allows for the possibility of negative cash flows. Negative cash flows are frequently observed in the data and are an important determinant for cash holdings.

(Un)intended Consequences of a Mandatory Dividend Payout Regulation for Earnings Management: Evidence From a Natural Experiment

We examine the (un)intended consequences of a mandatory dividend payout regulation for firms’ financial reporting choices using a natural experiment in China. Beginning in October 2008, China required firms desiring to raise new equity capital to maintain a cumulative dividend payout ratio of at least 30% over the past 3 years. We find that firms with a cumulative payout ratio from the prior year very close to but slightly lower than the mandated dividend threshold report lower discretionary accruals but do not increase dividends. In addition, this pattern is more pronounced in firms with greater cash flow deficits, firms with faster sales growth, and firms located in regions with lower bank development. We also find that the negative discretionary accruals are concentrated in firms with return on equity well in excess of another regulatory benchmark. In contrast, the only firms that increase dividends in response to the regulation are firms with a positive cumulative payout ratio far below the mandated threshold. Because dividend payout regulations have been suggested as a possible solution to agency problems, our results provide important policy feedback about the effectiveness of such regulations.

Working Capital Buffers Gone at End of 2016

As was forecast, working capital on farms decreased during 2015 (see farmdoc daily, October 6, 2015). Given 2016 income prospects, further decreases in working capital should be expected. At the end of 2016, most of the working capital reserves built during high-income years from 2007 to 2013 will be gone. Working capital levels will again be at levels comparable to 1996 through 2006. In 2015 and 2016, working capital reserves were used to fund cash flow shortfalls coming from operations. If prices remain low through 2017, means other than reducing working capital likely will be needed to address cash shortfalls.

Liquidity management with decreasing returns to scale and secured credit line

This paper examines the dividend and investment policies of a cash constrained firm, assuming a decreasing-returns-to-scale technology and adjustment costs. We extend the literature by allowing the firm to draw on a secured credit line both to hedge against cash-flow shortfalls and to invest/disinvest in a productive asset. We formulate this problem as a two-dimensional singular control problem and use both a viscosity solution approach and a verification technique to get qualitative properties of the value function. We further solve quasi-explicitly the control problem in two special cases.

Market Dynamics. On a Muse of Cash Flow and Liquidity Deficit

A first attempt at obtaining market--directional information from a non--stationary solution of the dynamic equation price tends to the value that maximizes the number of shares traded per unit time [1] is presented. We demonstrate that the concept of price is poorly applicable to market dynamics. Instead, we consider the execution flow 𝐼=d𝑉/d𝑡 operator with the impact from the future term providing information about not--yet--executed trades. The impact from the future on 𝐼 can be directly estimated from the already--executed trades, the directional information on price is then obtained from the experimentally observed fact that the 𝐼 and 𝑝 operators have the same eigenfunctions (the exact result in the dynamic approximation 𝑝=𝑝⟮𝐼⟯). The condition for no information about the future is found and directional prediction quality is discussed. This work makes a substantial contribution toward solving the ultimate market dynamics problem: find evidence of existence (or proof of non--existence) of an automated trading machine which consistently makes positive P＆L on a free market as an autonomous agent (aka the existence of the market dynamics equation). The software with a reference implementation of the theory is provided.