Continuous Cash Flow Research Articles

The present value discounting convention errors in uniform intra-period cash flow distributions

This study compares the estimation errors of several present value discounting conventions (end-of-year, mid-year, and the more recently proposed harmonic mean convention) for a uniform distribution of intra-period cash flow — continuous and discrete. Our results show that the mid-year convention performs best for continuous uniform cash flow streams, and that the mid-year and harmonic mean conventions produce smaller errors for discrete uniform cash flow streams than the end-of-year convention. We supply conditions for the order of preference in the case of discrete uniform cash flow distributions and provide some additional insights into the errors of the discounting conventions for both continuous and uniform intra-period cash flow distributions.

Midyear or End of Year Present Value Factors? Clues from Valuation in Discrete and Continuous Time

This article addresses whether appraisers should be using midyear or end-of-year present value factors. Although this is a topic that other authors and I have addressed, this article has some unique and novel approaches to the topic. The mathematics in this article accounts for cash flow growth within and between years rather than between years only, as others have modeled. We model in both discrete and continuous time, with discrete time in multiple time frames, almost continuous, daily, monthly, quarterly, and annual cash flows. Our continuous time results are very surprising. We conclude that, absent strong seasonality, midyear annual cash flows are very accurate and very little difference is seen in valuation results between quarterly, monthly, daily, and continuous cash flows. They are all close to midyear Gordon model multiple results.

Impact of COVID-19 on KPIs Development Focused on Inventory Turnover Ratio in Automotive Sector

Key Performance Indicators (KPIs) are the vital navigation instruments used by managers to understand whether their business is on a successful voyage or whether it is veering off the prosperous path. The right set of indicators will show the company performance and point out the areas which need attention. The impact of COVID-19 on today’s globally integrated automotive sector is significant. The management has focused on main questions like how to accelerate cost-out measures and optimize the working capital across the entity. One of the items that have started to be in the center of attention nowadays is a company’s inventory and its level and turnover time. Therefore concerning about this, the inventory management should be sensitive in terms of continuous production and cash flow. Important question for management is how to identify, prioritize and accelerate cost-out measures across the entity. Finding the way how to optimize of volume of inventory, working capital and identify the proper measures to deliver rapid, tangible cash-flow benefits should be consulted in each company on daily basis.

Оценка эффективности инвестиционных проектов, генерирующих непрерывные денежные потоки

A methodology for evaluating the effectiveness of investment projects that gen-erate continuous cash flows, which are typical for the service sector and retail trade, has been developed and substantiated. Models of discounted cash flow (DCF) for projects that generate continuous cash flows are obtained and presented. The use of models illus-trated with a concrete example are given. It is shown that in short-term projects, with a high cost of capital and, accordingly, a high discount rate, the net present value of the discounted continuous cash flow is significantly higher than the net present value of the cash flow obtained under the assumption of a discrete flow. In some cases, this may lead to errors in assessing the effectiveness of investment projects and errors in the se-lection of projects, since their implementation leads to cash flows that do not belong to the end of each period, as is assumed in well-known methods, but are distributed in the course of periods.

Survival strategies of producers involved in short food supply chains following the outbreak of COVID-19 pandemic: A Hungarian case-study.

Survival strategies of producers involved in short food supply chains following the outbreak of COVID-19 pandemic: A Hungarian case-study.

Shortcomings of NPV Calculation: Does One Error Annul the Other?

The research aims at analyzing the aggregate effect of possible errors related to the "textbook" method of present value calculation. Two main errors could stem from end-of-period convention and calculation according to expected lifespan. The magnitude of such errors depends on the cash flow pattern and the probability distribution of asset life, therefore the combination that may be regarded as the most typical in practice has been chosen as the subject of the examination, i.e., the continuous exponential cash flow pattern with exponentially distributed life. Based on the result of previous studies examining the errors separately, it seems possible that the two errors lead to a more accurate approximation – considering the absolute value of the relative error – compared to making only one of the errors. After the examination, I conclude that in the most typical cases of practice, it is not worth to take either the correct cash flow pattern or the life uncertainty into account beyond the "textbook" method.

Research on the Application of Computer Technology in Enterprise Financial Management

Due to the backwardness of domestic enterprise informatization, accounting computerization is often just input vouchers into the computer, and the system automatically sets out the table, which reduces only a part of the accounting work, and most accountants are still busy doing accounts. Passively address risks only when they arise. The core of good financial management is two aspects, on the one hand to ensure good cash flow, and do cash flow appreciation, on the other hand to do risk prevention and control. The specific approach is to effectively manage financial management and investment in the short term, control income and expenditure in the medium and long term, ensure the continuous cash flow at each time point, and at the same time take a step forward in risk prevention and control, and anticipate risks in advance and avoid them through a large number of tools. As a powerful tool, the computer is undoubtedly a very good choice. Based on this, this paper discusses the application of computer technology in enterprise financial management.

Clustering electricity market participants via FRM models

Collateral mechanism in the Electricity Market ensures the payments are executed on a timely manner; thus maintains the continuous cash flow. In order to value collaterals, Takasbank, the authorized central settlement bank, creates segments of the market participants by considering their short-term and long-term debt/credit information arising from all market activities. In this study, the data regarding participants’ daily and monthly debt payment and penalty behaviors is analyzed with the aim of discovering high-risk participants that fail to clear their debts on-time frequently. Different clustering techniques along with different distance metrics are considered to obtain the best clustering. Moreover, data preprocessing techniques along with Recency, Frequency, Monetary Value (RFM) scoring have been used to determine the best representation of the data. The results show that Agglomerative Clustering with cosine distance achieves the best separated clustering when the non-normalized dataset is used; this is also acknowledged by a domain expert.

Analysis of the Current Situation of Asset Securitization of State-Owned Enterprises in China

<p>With the rapid development and progress of China's economy, state-owned enterprises have also carried out reforms. As an important part of the reform, securitization has promoted the reform of state-owned enterprises. Securitization will issue private securities backed by financial or other assets with poor liquidity, and pay principal and interest based on predictable and continuous cash flow income. The issuer purchases assets, forms an asset pool and issues asset-backed securities. This paper focuses on the achievements of the reform of state-owned enterprises in China, indicates the problems and puts forward improvement suggestions in the process of securitization reform.</p>

ВЛИЯНИЕ КРИЗИСА НА ДИНАМИКУ ЧИСТОГО ПРОЦЕНТНОГО ДОХОДА КОММЕРЧЕСКИХ БАНКОВ В СИРИИ

Commercial banks occupy a significant place in the economic system of the country. They create, accu-mulate money and contribute to their redistribution between sectors of the economy. The banking sector is of particular importance for the real segment of the economy, providing continuous cash flow and lending to industrial enterprises. At the same time, as commercial organizations, banks aim to make a profit. The main source of profit is net interest income. This article presents the results of a study of the net interest income of traditional banks in Syria, for three periods: pre-crisis, crisis, the period of recovery from the crisis.

Labour-only procurement

PurposeDue to its cost savings nature and ability to ensure constant jobs for contractors, this study aims to assess the capability of the labour-only procurement system to serve as a surviving strategy for construction contractors in a challenging economy.Design/methodology/approachThe study adopted a mixed-methods design. An interview and questionnaire were used to harness information from 98 construction participants who have been involved in labour-only procured projects. These respondents were identified through snowballing. Frequency, percentage, mean item score, Mann–Whitney u-test and content analysis were used in analysing the data gathered.FindingsResult revealed that participants are willing to execute more projects through this system because it gives considerable cost savings for clients and provides reduction in contractor’s risk and allows them to maintain healthy cash flow. The main factors influencing its usage are the client’s decision to procure materials, need for job at hand for contractors and the need for referrals from clients for subsequent jobs.Practical implicationsFindings of this study will assist contractors to understand the potential of this procurement system as a surviving option in a harsh economy. Small and medium contractors can make use of this available opportunity of having projects at hand at reduced risk to ensure continuous cash flow to keep their organisations afloat.Originality/valueThe contribution of this study to the body of knowledge lies in its provision of a reasonable insight on the inherent nature of a procurement system as a surviving strategy for contractors unlike the usual assessment of the generic survival strategies adopted in other studies.

Investment Appraisal and the Choice between Continuous and Discrete Cash Flow Discounting

The vast majority of corporate finance textbooks presents the problem of investment decisions considering discrete cash flows at the end of each period. However, on several occasions, this assumption does not fit the facts, as in the case of the revenues of large retailers, which tend to be generated almost continuously, instead of at the end of each year. In this paper, we compare the net present value of a typical investment considering both a discrete distribution of expected cash flows and a continuous one. We show that the differences observed depend upon the behavior of the function that describes the cash flows and upon the capital cost used to discount the values. Differences tend to be higher if higher capital costs are used. As a result, riskier projects are more sensitive to the right choice of the cash flow distribution to be used in its appraisal and no method can be considered, a priori, better than the other, as operational, fiscal and accounting aspects may make continuous or discrete cash flows more appropriate to describe practical realities. Thus, the article contributes to better supporting investment decisions and to enriching teaching material addressing the subject of investment decisions.

Continuous Cash Flow Payment: Theories and Practice Framework

ABSTRACTContinuous cash flow payment is the key element to complete the payment framework. While discrete cash flow payment matches the event of exchange of goods, continuous cash flow payment can closely match the process of exchange of services. We discovered that by embedding continuous cash flow models into a settlement system, continuous cash flow payment is doable under recent FinTech environment. This article constructs this novel continuous cash flow payment framework and theorizes payment practices into a unified framework.

О НЕПРЕРЫВНЫХ ФИНАНСОВЫХ ПОТОКАХ ПОГАШЕНИЯ КРЕДИТА, ВЫДАННОГО ПОД СЛОЖНЫЙ ПРОЦЕНТ

Цель: условная оптимизация погашения кредита при условии сложного непрерывного начисления процентов по ставке р на непрерывный финансовый поток заданной показательной плотности. Обсуждение: особенностью работы является одновременный учет временной и безвременной стоимости денег. Введено понятие эквивалентности процентных ставок погашения кредита. Она является продолжением аналогичных исследований для простого начисления процентов. Сохранены все авторские определения и термины из этой работы. Результаты: предлагается широкий выбор возможных планов погашения кредита, выданного под сложный (непрерывный) процент. На практике большей частью применяется равномерное погашение кредита и иногда – по прогрессиям. Планы погашения по показательным кривым плотности позволяют учитывать более тонкие финансовые возможности или интересы как заемщика, так и кредитора.

A sequential pricing framework for corporate securities: The case of rating-trigger step-up/-down bonds

We develop a sequential pricing framework in a continuous time cash flow model allowing for repeated valuation of different cash flow claims. One claim is valued until a prespecified boundary is hit, which is subsequently used as the new valuation starting point for the next claim. This highly flexible pricing framework is applied to the pricing of rating-trigger step-up/-down corporate bonds, the coupon payments of which depend on the issuing company’s credit rating. We present a simple closed-form pricing solution for this type of bonds including both a step-up and step-down threshold, as well as a lower default boundary.

Neo-females production and all-male progeny of a cross between two Indian strains of prawn ( Macrobrachium rosenbergii ): Population structure and growth performance under different harvest strategies

Abstract Culturing all-male giant freshwater prawn ( Macrobrachium rosenbergii ) presents a promising avenue for increasing yield and income. A sex reversal technology through androgenic gland (AG) manipulation was introduced, posing an increased risk of inbreeding. Thus, a scheme for Kerala (K) and West Bengal (WB) strains crossing using neo-females from one strain with males from the other strain was suggested. Microsurgical sex reversal was applied in juvenile males of the Kerala strain at developmental stages of PL 15 , PL 30 , PL 45 and PL 60 . Improved success rates of feminization were achieved when the intervention was performed at early developmental stages. Prawns operated at the PL 15 and PL 30 stages began developing ovaries as early as 105 days after metamorphosis and were able to produce offspring. A grow-out experiment in earthen ponds of all-male progeny originating from Kerala neo-female × West Bengal males was performed and the effect of selective harvest (SH) of 100 g) marketable size group was significantly higher, and that of the medium-sized (5075 g) group was lower in the FH treatment in comparison with the SH. The cross tested herein demonstrated substantially higher yield than that obtained in previous studies, however, no statistically significant difference in net productions was found between the FH and SH treatments (2207 ± 130 versus 2163 ± 137 kg ha − 1 , respectively). Cost–benefit analysis after nine months of grow-out showed higher profit and higher benefit–cost ratio in the FH group. However, the SH treatment resulted in more uniform marketable prawns and suggested a continuous cash flow throughout the grow-out period.

Критерии эффективности инвестиционных проектов с дискретными и непрерывными денежными потоками

For an assessment of efficiency of investment projects use various criteria which decide on use of discounting of discrete cash flows. For an assessment of investments in the form of a portfolio of market financial instruments taking into account features of behavior of investors and risks the criterion of admissible losses is used. Criterion acceptable losses while limited in its application, despite the development of research in this area. It is used only at an assessment of investments in the form of a portfolio of market financial instruments. When evaluating the efficiency of investment projects using a model of the discounted discrete cash flow. It is offered to use criterion of admissible losses for an assessment of separate projects. It is offered to define it as the lower bound of a confidential interval of the net specified value: N = NPV – t(P) · s NPV, where NPV – a population mean of the net specified value; s – mean square deviation of the net specified value of the project; t(P) – coefficient of a confidential interval; P – confidential probability which is chosen by the investor – the person, making the decision. It is offered to select projects, the lower bound of the net which specified value is represented investors preferable. For the investment projects, generating continuous cash flows, it is offered to use integrated model of discounting of continuous streams. For determination of sizes of criterion of admissible losses of the projects generating discrete also cash flows are continuous, necessary settlement formulas are given. Application of the offered criterion of admissible losses of investment projects and programs will allow to consider reasonably preferences of the investor and to increase the accuracy of estimates of efficiency taking into account risk.

Concurrent tolerancing for design and manufacturing based on the present worth of quality loss

The quality loss function developed by Taguchi provides a monetary measure for the deviation of the product quality characteristic from the target value. Product use causes degradation on its quality characteristic, and since such a deviation can be changing over time, so can the quality loss. However, most studies on concurrent tolerancing theory do not consider the quality loss caused by the degradation. In this paper, the present worth of expected quality loss expressed as the function of the pertinent process tolerances in a concurrent tolerancing environment is derived to capture the quality loss due to product degradation over time as a continuous cash flow function under continuous compounding. A new tolerance optimization model, which is to minimize the summation of manufacturing cost and the present worth of expected quality loss, is established to realize the concurrent tolerance allocation for products with multiple quality characteristics. An example of the bevel gear assembly involving concurrent allocation of design and process tolerances is given, demonstrating that the proposed model is feasible in practice.

Diversifikationsvorteile verbriefter Immobilienanlagen in einem Mixed-Asset-Portfolio

AbstractThis article examines whether international investors benefit from adding real estate investment trusts (REITs) to a mixed asset portfolio consisting of global stocks, bonds, hedge funds, and commodities. Previous literature has shown that REITs provide a strong co-movement with direct real estate in the long run. We therefore test the diversification potential of international REITs within the strategic asset allocation. Using the Johansen cointegration technique, we show that there is no long-term co-movement between REITs and the other asset classes in the period from January 1990 to December 2009. Thus, the empirical evidence suggests that REITs improve the diversification potential for active investors and those with a long-term investment horizon by simultaneously generating continuous cash flows.

Stochastic compounding models for continuous uniform cash flows arising in risk management

This paper investigates the conditions under which zero unimodality is introduced into stochastic future value distributions for continuous uniform cash flows, and discusses the associated moments. The distribution of a future value generated from such cash flows is shown to be far more complicated than hitherto thought. In many situations, the statistical evidence suggesting there is potential to generate realistic future value is contradictory. These points are illustrated using a number of important areas of practical application in risk management.