Cash Flow Generation Research Articles

Municipal fiber in the United States: A financial assessment

Despite growing interest in broadband provided by municipally owned and operated fiber-to-the-home networks, the academic literature has yet to undertake a systematic assessment of these projects' financial performance. To fill this gap, we utilize municipalities' official reports to offer an empirical evaluation of the financial performance of every municipal fiber project in the U.S. operating in 2010 through 2019. An analysis of the actual performance of the resulting fifteen-project panel dataset reveals that none of the projects generated sufficient nominal cash flow in the short run to maintain solvency without infusions of additional cash from outside sources or debt relief. Similarly, 87% have not actually generated sufficient nominal cash flow to put them on track to achieve long-run solvency. In addition, 73% generated negative nominal cash flow over the past three fiscal years, leaving them poorly positioned to make up their deficits and causing them to fall farther into debt. An assessment based on the net present value of these projects' operating cash flow indicates that 53% of projects would not be on track to breakeven even assuming the theoretical best-case performance in terms of capital expenditures and debt service. Close analysis of these projects’ performance reveals that revenue generation likely plays a more important role in generating cash flow than efficiency in construction costs or operating efficiency.

Development of the system of state financing of Compulsory Health Insurance

Objective: to study the potential for the development of financing the Compulsory Health Insurance (CHI) system in Russia.Material and methods. Оur research estimates the amount of funds available in the CHI system based on fractal analysis and ARIMA modeling. The proposed approach makes it possible to determine the critical amount of funds in the CHI system. Once the limit is reached, the chance of violating the economic security requirements will increase. Results. Аn increase in the volume of available funds in the CHI sector is expected in the mid-term perspective on the verge of quarter 1, 2023. The amount of funds required to pay for medical care for the respective period of time will increase by 0.77% quarterly.Conclusion. Gaining additional funds might be possible by optimizing the internal networks for generating cash flows in the CHI system, as well as applying additional ways of financing medical care (particularly Voluntary Health Insurance policies). It would be practical to redistribute the functions of financing health care between the Federal Fund for CHI and its territorial branches. It is essential to review the role of health insurance companies in monitoring the health care quality by improving the communication with citizens.

Инфляция и перераспределение богатства

The modern financial system pays special attention and plays a special role in the structure of funding sources to loan capital as it is cheaper and less risky. Such an interpretation made it possible to increase not only capital-intensive industrial production and government spending to support the economy, but also financial markets through the critical debt load of post-industrial economies in the context of not-so-high growth in the world gross domestic product. The gigantic cash flow generated through loan capital and the cost of servicing it sets the task of rethinking the role of loan capital and developing a new approach to the current financial system, its transformation. The reaction of the financial system to the policy of monetary easing, which has intensified in recent years, should have been described by an increase in inflation in correlation with the growth of the money supply, however, according to a number of experts, today's inflation has completely different sources of formation, which exacerbate contradictions between emission centers, industrial capital, world cash flow generation centers (these are not only global financial centers, but also transnational companies), and end consumers. The study aims to describe and assess inflation as a separate element of capital development - inflationary capital - that helps to solve the most acute problem of debt load. At this stage of development, financial systems cannot authorize this capital independently, and this fact cannot be ignored. The methods used in the research are: logical (analysis, synthesis, induction, deduction, analogy), hypothetical, probabilistic-statistical. The main results and conclusions of the research are the following. The analysis of the mobilization of loan capital, which has taken on an alarming scale, forms numerous contradictions not only between forms of ownership, but also between countries. The attempt by the Federal Reserve System to solve this problem through the gradual tightening of the monetary system is seen by many experts as the first step in the global financial crisis. The rising cost of borrowing for the US Treasury Department with every basis point raised means serious financial risks for the global economy. Rising inflation, as a systemic phenomenon of rising costs, only intensifies the efforts of the Federal Reserve System to curb inflation. The counterbalances for leveling the negative excessive use of loan capital cannot be achieved by increasing militarism and bringing to a military clash at the global level, as was the case in the past periods of the existence of socioeconomic formations, although we can observe such attempts.

МЕТОДИЧНІ АСПЕКТИ ОЦІНКИ ЕФЕКТИВНОСТІ УПРАВЛІННЯ ДІЯЛЬНІСТЮ ВІТЧИЗНЯНИХ ПІДПРИЄМСТВ ТА ОРГАНІЗАЦІЙ В УМОВАХ НЕВИЗНАЧЕНОСТІ ТА РИЗИКУ

The article deals with methodological aspects of assessing the effectiveness of managing the activities of domestic enterprises and organizations in conditions of uncertainty and risk. The emergence and formation of the most common methods of evaluating the effectiveness of management of enterprises and organizations are considered in chronological order, such as: the DuPont Model, income from invested capital ROI, net profit per share (EPS), the ratio of the share price and net profit organization (P/E), ratio of market to book value of shares (M/B), return on net assets (RONA), return on equity capital (ROE), cash flow management (Cash Flow), value management (VBM), balanced system BSC (Balanced Scorecard) indicators, rating methods, benchmarking and others. The advantages and disadvantages of the considered methods of evaluating the effectiveness of management of the activities of enterprises and organizations are determined. The grouping of methods for evaluating the effectiveness of management of the activities of domestic enterprises and organizations was carried out in accordance with the main key aspect of their activity, which is considered as key in the methodology, namely: activity on the stock market, profitability of equity and investments, the ability to generate cash flows, the ability to create additional value for market, regulations regarding competitors. The main groups of stakeholders of domestic enterprises and organizations in conditions of uncertainty and risk are considered. The main external (potential investors, suppliers, buyers, the state and individual public groups, banks, potential employees) and internal stakeholders (owners, management and staff) of domestic enterprises and organizations have been identified. It was determined that none of the existing methods of assessing the management of the activities of domestic enterprises and organizations in conditions of uncertainty and risk of the organization can fully satisfy the requests of stakeholders. Based on this, recommendations were developed for the selection of a methodology for evaluating the effectiveness of managing the activities of domestic enterprises and organizations in conditions of uncertainty and risk for each of the main stakeholder groups in accordance with the goals of applying the evaluation results.

Measuring The Impact of an Administrative Fine on a Company And Its Future Survival: a Case Study From The Czech Republic

Abstract An administrative fine is a monetary penalty that may be imposed by a supervisory authoritity as an administrative punishment. Such a fine adversely interferes in the cash flow generation of the company in question. The fine can be described as an investment carrying opportunity costs with no economic returns. However, according to the judgment of the Constitutional Court of the Czech Republic Pl. ÚS 3/02 of 13 August 2002 it is submitted that the fine cannot be imposed in such an amount that would ultimately be liquidating for the sanctioned entrepreneur. The assessment of whether the specific amount of the fine imposed represents such an intensive interference with the entrepreneur's property that his business activity becomes pointless (i.e., in the long run only for the payment of a fine) is elaborated in this article. Based on a case study from the Czech Republic, this article deals with an example of a suitable methodological procedure, on the basis of which it is possible to evaluate the impact of a specific amount of fine imposed on the property of a sanctioned entrepreneur and assess ex ante whether (i) continuity of his business will be interrupted in the future, i.e., when, as a result of the payment of the fine, he eventually goes bankrupt in the form of insolvency or over-indebtedness and / or (ii) his business activity will only serve to pay the fine and thus become "pointless". The presented economic narrative and methodology are relevant for policy makers and, particularly, for supervisory authorities imposing the fines or assessing the requests for remission.

COEFFICIENT ANALYSIS OF CASH FLOWS OF THE ENTERPRISE

Introduction. Cash flow analysis is a necessary prerequisite for their effective management to accelerate the turnover of assets and capital and ensure financial stability and solvency of the enterprise. Methods. In the process of research general and special methods were used, in particular: dialectical method for determining general approaches to scientific research; analytical and monographic method was used in the review of literature sources; the method of classifications made it possible to differentiate the main indicators of cash flow analysis by analytical groups. Results. Cash flow analysis is an integral part of the process of managing them because, first of all, it allows you to get a qualitative description of the effectiveness of cash flow management. The article defines the algorithm for calculating the coefficients of estimation of cash flows of enterprises. Various relative indicators of cash flow assessment are grouped into 11 clusters - indicators: cash flow structure, cash flow efficiency, cash flow profitability, cash flow adequacy (deficiency), cash flow generation, cash flow liquidity, solvency, cash flow quality, operating activities, uniformity and interconnection. The given relative indicators of the analysis of cash flows allow estimating comprehensively the ability of the enterprise to generate cash flows of a volume sufficient for calculation on monetary obligations. The analysis of cash flows in dynamics allows establishing positive and negative tendencies based on which optimization adjustments in the management of cash flows of the enterprises are accepted. Discussion. Prospects for further research are to identify the impact of effective cash flow management on ensuring the financial stability of the enterprise. Keywords: cash flow, operating activities, financial statements, ratio analysis

Association of related party transactions with sensitivity of investments and external financing

We investigate the association of related party transactions (RPTs) with the sensitivity of firm-level capital allocations. We examine whether opportunistic RPTs are associated with investment and external financing sensitivities to both Tobin's Q and internally generated cash flows. We expect the opportunistic nature of the RPTs dampens the Q sensitivities and increases the cash flow sensitives. We provide evidence that both investment and external debt sensitivities to Q are lower in firms with opportunistic RPTs compared to firms without opportunistic RPTs. Moreover, firms with opportunistic RPTs have higher external equity financing sensitivity to internally generated cash flows. Our results show that opportunistic RPTs are associated with capital allocations. Results are robust to the inclusion of governance attributes. Our study provides further evidence on the opportunistic nature of certain RPTs.

Public sector bank dominated financing and earning quality: Indian evidence

PurposeGood earnings quality (EQ) provides reasonable assurance as to the reliability of future cash-flow generation capability of the borrowing firms and thereby mitigates the credit risk of the banks. Against the backdrop of the stressed-assets problem in public-sector banks in India, adversely impacting the public finance system, this paper aims to explore the role of EQ of the borrowers in obtaining bank credit and the ways to mitigate the problem.Design/methodology/approachUsing a sample of listed 3,486 non-financial and non-government firms, the authors apply Jones (1991) model to estimate their EQ. Then, the authors conduct Hausman’s (1970) test and find the existence of a two-way relation between bank finance and EQ. The authors adopt a two-stage least-square regression model to test the nature of the association between the two after controlling for firm and industry-level characteristics.FindingsThe empirical results suggest that there exists a two-way negative association between EQ and bank finance implying that the Indian firms tend to report abnormal accruals to enhance tangibility for enjoying higher credit limits and easier access to bank finance. Also, the poor EQ is associated with earnings volatility, adversely impacting the credit quality. The findings are consistent.Practical implicationsThe study highlights the role of EQ in mitigating credit risk and addressing adverse selection problems in granting credit by practicing bankers.Originality/valueThe findings of the study enrich the literature on EQ, capital structure, agency theory and public finance in several ways and have significant ethical and policy implications in bank-finance-led economies.

Risk Analysis of Australia’s Victorian Dairy Farms Using Multivariate Copulae

AbstractThe study provides comparative risk analyses of Australia’s three Victorian dairy regions. Historical data were used to identify business risk and financial viability. Multivariate distributions were fitted to the historical price, production, and input costs using copula models, capturing non-linear dependence among the variables. Monte Carlo simulation methods were then used to generate cash flows for a decade. Factors that influenced profitability the most were identified using sensitivity analysis. The dairies in the Northern region have faced water reductions, whereas those of Gippsland and South West have more positive indicators. Our analysis summarizes long-term risks and net farm profits by utilizing survey data in a probabilistic manner.

Analyze the Determining Factors of Manager Efficiency in the Generation of Operating Cash Flow

According to the objectives of financial reporting, particularly stewardship objective, the aim of this study is to assess the manager's efficiency of listed firms in the Tehran Stock Exchange in the generation of operating cash flow on the basis of data envelopment analysis (DEA) during the period 2013 to 2019. In this survey, for research hypotheses testing, multivariate regression was employed. The research results indicated that the level of manager efficiency in the generation of operating cash flow is very low and has a decreasing trend. Also, the evidence demonstrated that factors including profitability, CEO's financial knowledge, and percentage of shares owned by institutional shareholders have no significant correlation with the managers' efficiency. Nevertheless, company size, financial leverage, board independence, and competitiveness have a significant correlation with the managers' efficiency in the generation of operating cash flow. Meanwhile, company size has a negative correlation with managers' efficiency and a positive correlation with the remaining items.

Analysis of the Determining Factors of Manager Efficiency in the Generation of Operating Cash Flow

According to the objectives of financial reporting, particularly stewardship objective, the aim of this study is to assess the manager's efficiency of listed firms in the Tehran Stock Exchange in the generation of operating cash flow on the basis of data envelopment analysis (DEA) during the period 2013 to 2019. In this survey, for research hypotheses testing, multivariate regression was employed. The research results indicated that the level of manager efficiency in the generation of operating cash flow is very low and has a decreasing trend. Also, the evidence demonstrated that factors including profitability, CEO's financial knowledge, and percentage of shares owned by institutional shareholders have no significant correlation with the managers' efficiency. Nevertheless, company size, financial leverage, board independence, and competitiveness have a significant correlation with the managers' efficiency in the generation of operating cash flow. Meanwhile, company size has a negative correlation with managers' efficiency and a positive correlation with the remaining items.

Can the Audit Opinion Influence the Portfolio Investment Decisions? The Case of Listed companies

As a part of their strategic transactions, corporations often acquire stakes in other companies that do not grant them control, but allow them to use their resources to increase their profitability, access technological progress and innovation, develop products, or obtain dividends. The main objective of this paper is to identify the factors influencing the behavior of acquirers who buy securities in the capital of the target companies, listed on Bucharest Stock Exchange, without intending to control them. The study aims to describe two dimensions of the buyers' behavior, when they buy shares that do not lead to the control of the target companies (below 50%). The first dimension refers to the buyer's decision to invest in a certain share of capital, influenced by the profitability of the target company and its market capitalization (dimensions of their performance), but also by the audit opinion on the annual financial statements. The relationship is positive and significant. The second dimension focuses on the decision of the acquirers to invest or not in a blue-chip company (top companies, considered the most efficient and stable on the financial market), with the main purpose of obtaining dividends or trading the respective securities on the capital market, in order to generate cash flows. The result shows that investors buy small shares in blue chip companies, compared to other companies, taking into account their performance and the audit opinion on the annual financial statements.

A framework for modelling cash flow lags

Traditional models of irreversible investment problems assume that the investment starts generating cash flows immediately, i.e., at the same time as the investment is undertaken. Real-world investment situations are characterized by time-to-build or investment lags, which means that there is a time difference between when the investment is made and when the investment starts generating cash flows. We combine two existing models of investment lags to obtain a flexible, yet simple, way of modelling and analyzing the effects of investment lags. Both traditional models, and models that incorporate the effects of time-to-build, typically assume that the expected future cash flows generated by an investment are represented by a single cash flow that reflects the size of the market value of an investment. To reflect real-world cases where investments generate cash flows in several time periods, we present a framework in which cash flows are explicitly allowed to be spread out in time. Our model can be used to incorporate cases where an investment is partially sold in different time periods. Using an irreversible optimal investment timing problem case study, we show how our framework makes it possible to easily compare the effect of different cash flow timings. In this case, the value and the timing of the investment depend on a constant that in a natural way can be decomposed into three parts, thereby showing the influence of the value and timing from the respective parts of the framework.

MODELS OF DEVELOPMENT OF STARTUP PROJECTS BASED ON GAME THEORY

The article discusses the results of research related to solving the problems of development of start-up projects in the field of information technology. Studies have shown that, as a rule, such enterprises operate in the field of providing IT services and at the same time use the SaaS business model. Working in market conditions, such enterprises offer services for using the IT products developed by them, forming a pool of loyal customers. Such clients, through subscriptions, generate cash flows to support development projects for start-up products. The conditions and features of interaction of three groups of key stakeholders (owners, users (clients) and developers) are considered. To study and analyze the mutual influence of these interactions, an approach based on the use of game theory for three stakeholders is proposed. This made it possible to flexibly define interaction strategies based on pricing policy, volume and cost of further software development for IT products and the requirements of loyal customers. The identified structural components and the interrelationships between them formed the basis of the proposed conceptual model "growing cone" for projects to create and develop complex IT products. Using the constructed mathematical descriptions of the three key stakeholders, a model of their interaction and mutual influence was developed based on game situations. In shaping their strategies of actions and influences for their own benefit, they must take into account the actions of two other stakeholders. The analysis of the research results was carried out and typical strategies of interactions of the considered stakeholders were identified. To simulate and test the proposed models, a heuristic algorithm with an optimization function was used. To generate program codes, the functionality of the Python libraries was used. An analysis is carried out and conclusions are drawn about the effectiveness of the proposed approach.

Accounting Policies in the Function of Quality Assessment of Financial Statements

Abstract Financial statements represent an instrument by which relevant information about a company is passed on to its users. Based on the information presented in the financial statements, i.e. information on the financial position and performance of the company, and generated cash flows and capital, users make business decisions. Specific accounting policies serve as the basis for the preparation of quality financial statements. Management is responsible for the preparation and presentation of financial statements and selects accounting policies. Although simple, the issue of choosing the accounting policies can be extremely delicate and complex. Besides management, there are other stakeholders who may be affected by this issue. As a consequence, there are complex relationships that affect the choice of accounting policies, and thus the quality of financial statements.

Airline revenue planning and the COVID-19 pandemic

PurposeThe static world of flight scheduling where schedules rarely change once published is becoming more responsive with schedule change updates leading up to the departure date due to demand volatility and unpredictable demand patterns. Innovation in cash flow generation will take center stage to operate the business in these uncertain times. Forecasting demand for future flights is a challenge since historical demand patterns are not meaningful which requires a new adaptive robust revenue management approach that monitors key metrics, detects anomalies and quickly takes corrective action when performance targets cannot be achieved.Design/methodology/approachThe novel COVID-19 pandemic decimated the travel industry in 2020 and continues to plague us with no end in sight. With the steep drop in revenues, airlines need to adapt to a new marketing planning process of scheduling, pricing and revenue management that is more nimble to adapt quickly to changing market conditions. This new approach will continue to be relevant in a post-COVID-19 world during and after economic recovery.FindingsA methodology for airline revenue planning: scheduling, airline pricing and revenue management, has been proposed that will also work in a post-COVID-19 era.Research limitations/implicationsThe limitation of the proposed model is that it needs to be applied in practice to determine the true benefits of this novel approach to airline revenue planning.Practical implicationsFlight scheduling will rely more on clean sheet scheduling, schedule revisions and close in refleeting to better match demand to supply. The office of the chief financial officer will have a permanent task force to monitor cash flow and come up with innovative solutions to generate cash flow for liquidity. Adaptive robust revenue management workflows will be integrated into traditional revenue management workflows in the future for competitive advantage.Social implicationsIn a post-COVID-19 world it is anticipated that airline business processes will transform to be nimbler and more proactive in making timely decisions at a greater velocity.Originality/valueThe approach to airline revenue planning for scheduling, pricing and revenue management is a new business process that does not exist today at scale in the airline industry.

Theoretical aspects of research of infrastructure are in context of the project of approach

This article the infrastructure essence was investigated and the need exploring this category as an important factor of the state socio-economic development was underline. The developed infrastructure complex builds objective conditions to solve scientific and technical issues, optimizing economic ties, integrating the state into the global economic space. The implementation of projects the construction and modernization of infrastructure facilities will provide a multiplier effect and will contribute to economic growth. The relevance of the problems described is a condition for deep research in this direction. The purpose of the article is studeing the theoretical foundations of infrastructure and develops proposals for improving the classification of infrastructure in the context of the project approach. The survey methodology is based on methods of analysis, synthesis and comparison. These methods were used to study of existing approaches to the disclosure to essence of the infrastructure. The scientific novelty of the research is to develop a hierarchy of infrastructure classification within the framework of the project approach by grouping projects that ensure the functioning of the infrastructure, according to such hierarchical criteria as: the public purpose of the infrastructure project, the ability of the infrastructure project to generate cash flows, the goals of the infrastructure project. Conclusions. Investigations have show that in the economic literature there were different approaches to understand the essence of infrastructure, determining elements and classification one. The reasons for the different opinions lie in the practical using of the definition of infrastructure in various industries, spheres and areas of scientific research. Following investigate which had found out that the infrastructure was a multi-level system, which consists of material and non-material objects. Therefore, it is necessary to develop a classification for systematizing them according to different criteria Key words: infrastructure, infrastructure classification, project approach, infrastructure project, types of infrastructure.

Investment Valuation of Modern Business Models

The paper's purpose is to identify the changes in investment decision-making processes in the hybrid (traditional and digital) economy. It is hypothesized that business models and the digital environment change the classical prerequisites for making investment decisions, and this needs to be reflected in the investment valuation. Methods of system and critical analysis, value-oriented approach are used. The predominance of competition between business models (including within ecosystems), rather than organizations, and the reduction of the investor's need for the organizational and legal design of the investment object with a variety of digital solutions are established. It is argued that the investment potential of a modern business model is influenced by the organizational architecture, the infrastructure, the value formed by the consumer, communication and interaction with the immutability of the supply. The authors developed the business model's architecture with the allocation of nine basic elements and options for investment decisions in order to reflect the increasing design complexity and individualism of the business model. New cost factors for investment evaluation of business models are identified, including digital rent, pricing approaches, digital paradox, ecosystem protection from the market, etc. The qualitative features of an effective business model are established while maintaining a quantitative assessment based on the generated cash flow. The deduction is that as the complexity of business models increases and it is possible to integrate digital business metrics and traditional financial indicators. However, at present it is advisable to maintain the existing methodology of investment assessment, supplemented with new qualitative adjustments.

Los efectos de la deuda y la restricción financiera en el comportamiento de la inversión de las empresas brasileñas no financieras cotizadas en B3

Este estudio investigó el impacto de las restricciones financieras sobre la relación entre el comportamiento de inversión y las decisiones de endeudamiento de las empresas brasileñas cotizadas B3. Se utilizó una regresión lineal con datos de panel en una muestra de 536 empresas que cotizaron en el período de 2010 a 2017. El tamaño de la empresa, la deuda a largo y corto plazo y la estructura de la propiedad se consideraron como variables de restricción financiera. Se encontró que, en Brasil las grandes empresas y privadas, poseen mayor proporción de activos, tienen menores restricciones para endeudarse, y aun así, deciden sobre sus inversiones basándose en la oportunidad de crecimiento y en sus capacidades de generar flujo de caja. Mientras tanto, las empresas pequeñas, con una pequeña deuda bancaria a largo plazo y las estatales encuentran más restricciones financieras, en consecuencia, sólo invierten a partir de flujos de caja generados.

Performance assessment and sustainability of Civil Society Organizations

This article presents the results of a quanti-qualitative research process that introduces a theoretical model of sustainability assessment of non-profit Civil Society Organizations (CSO) within the tertiary sector. The theoretical model, in the quantitative approach, is composed of performance assessment indicators, efficiency and efficacy metrics, and a cash flow generation matrix (CGM) by applying basic matrix algebra. In the qualitative approach, the model encompasses indicators of satisfaction and social integration. In both approaches, the evaluation is separated by project, both individual and joint, taking into consideration each project’s independence and autonomy. The evaluation process is executed within the context of a governance commitment that uses voluntary service and offers non-state public services. The answers of the model, tested with academic data, anchor robust and meaningful contributions to the literature of sustainability assessment of tertiary sector organizations. Lastly, considering that the results obtained with standardized financial and accounting statements may hinder the model’s potential, it is encouraged that empirical research is conducted with managerial data.