Net Operating Income Research Articles

The Relationship between Liquidity and Firms’ Profitability: A Case Study of Karachi Stock Exchange

The purpose of this paper is to investigate the relationship between firm’s liquidity and profitability; and to find out the effects of different components of liquidity on firms’ profitability.The relationship between liquidity and firms’ profitability is empirically examined by collecting the data of 50 listed firms of Karachi Stock Exchange, Pakistan. Panel data has been collected from secondary sources for the year 2007 to 2011 .Net operating income and Return on assets are used measure of firm’s profitability. Liquidity of the firm is measured by using cash gap in days and current ratio. Firm size measured by net sales, total assets and market capitalization .The study applies regression analysis to determine factors affecting profitability. Incremental tests are carried out to see the importance of individual variables in the model.The results of correlation and regression analysis showed that there is a significant negative relationship between cash gap and return on assets while current ratio has significant positive relationship with profitability. Results further indicate that log of sales and log of total assets has positive significant relationship with profitability. The findings of this study are based on firms listed on the Karachi Stock Exchange (KSE). Hence, the results cannot be generalizable to those firms which are not listed on Karachi stock exchange. The sample of the study comprises only the merchandising and manufacturing firms. Banks are excluded due to their nature of work.

Withdrawn: Do Aggregate Earnings Components Predict GDP Growth Better? An International Setting Comparison

This study investigates the usefulness of aggregate accounting earnings and their components to predict GDP growth.This study shows evidence that net income, net operating income, other comprehensive income, and net income change at aggregate level could predict GDP growth. This study splits sample into developed and developing countries.Almost all of aggregate earnings components could predict GDP growth in developed countries.On the contrary, only other comprehensive income and net income growth could predict it in developing countries. Moreover, sensitivity analysis shows evidence that the predictive power of accounting numbers are more consistently found in developed countries. It implies that all economic activities of firms listed in developed countries’ stock exchanges fully reflect to that of macro economy. This reflection is better than those of in developing countries. We infer that the value relevance of accounting earnings and their disaggregation have reached not only in the capital markets but also in the national macroeconomy level.Indeed, this prediction seems dominantly to be accurate in developed countries only.

J-REIT所有オフィスにおけるCASBEE認証及び東京都トップレベル事業所認定が賃貸事業収益及び水道光熱費に与える影響

The purpose of this research is to evaluate the economic value of certification of green buildings based on j-reit (Japan Real Estate Investment Trust) owned office buildings. In the recent years, assessment systems for the environmental performance of buildings are being widely used in Japan. Some analyses were conducted in Japan to investigate whether green building certificates have a positive influence on the contract rent. However we need to investigate profits and expenses of the real estate rent to clearly explain the economic benefits of green buildings. In this research, we analyze the office building annual data in Japan which was disclosed by J-REIT. Operating benefits and utilities costs of 657 buildings in January 2014 － December 2014 was analyzed. Regarding the objective office, the total leased area is under 50000 m2 and each building was divided into green building certified or Non-certified. Subject green building certifications are Tokyo Top-Level Business Facility and CASBEE (Comprehensive Assessment System for Built Environment Efficiency). The net operating incomes of Top-Level Business Facility or CASBEE certified office buildings over 10000 m2 of total building area are bigger than that of not certified office buildings. The utilities costs of Top-Level Business Facility certified office buildings are the same as that of not certified office buildings, but the utilities cost of CASBEE certified office buildings is bigger than that of not certified office buildings. The net operating incomes of CASBEE certified office buildings over 3000 m2 and less than 10000 m2 of total building area are bigger than that of not certified office buildings. The utilities costs of CASBEE certified office buildings over 3000 m2 and less than 10000 m2 are the same as that of not certified office buildings. The net operating incomes of expired CASBEE certified office buildings over 10000 m2 of total building area are bigger than that of not certified office buildings. The utilities costs of expired CASBEE certified office buildings are the same as that of not certified office buildings. Using these results, the environmental performance of Top-Level Business Facility certified office buildings over 10000 m2 of total building area and expired CASBEE certified office buildings over 10000 m2 of the area, CASBEE certified office buildings over 3000 m2 and less than 10000 m2 of the area may be high in the value of the real estate. The utilities costs of buildings are not always related to the energy consumption, because an energy source, a type of contract and a contract fee are different in each building. In this survey, the primary energy consumption of CASBEE real estate buildings is correlated with the utilities cost of the buildings. The objective buildings do not install the regional air-conditioning.

Evaluación financiera de la industria de fabricación de papel, cartón y derivados en Colombia 2010-2015

The purpose of this paper is to evaluate the financial performance of the paper, paperboard and derivatives industry in Colombia in the period 2010-2015, through an analysis of accounting and value management indicators that measure growth, efficiency, efficacy and effectiveness. It is found that this industry generates accounting returns in almost every year, less in 2014; and that the behavior of its effectiveness depends in order of importance to the efficacy in the control of costs and expenses, to the efficiency of the use of resources, leaving as a third factor the financial leverage; however, aggregate economic value (EVA) is destroyed each year, and its aggregate market value (VMA) is negative. This industry is a value-destroyer because the profitability of net operating assets is lower than the cost of capital, where profitability is increasing, with a considerable drop in 2014, and the cost of oscillating capital. This contrasts with the counterpart sector in the United States of America where value is created in five years, with higher net operating income and lower capital cost than Colombia. The results found could be complemented with similar studies for groups of companies more homogeneous in age, size and geographical location.

Effects of economic conditions and other factors on hotel sale prices

Purpose This study aims to examine previously identified hotel automated valuation models (AVMs) using a more extensive and updated sample of hotel sale transaction data, introduce economic conditions as a new determinant for hotel market value and test the moderating role of economic conditions on the relationship between the previously identified indicators and market value, operationalized as sale transaction price. Design/methodology/approach This study performs simple and multiple regression analyses to examine the proposed relationships. The sample period is from 2000 to 2012, because the economy prior to 2000 is likely to have been a less-relevant economic environment for the contemporary business world. Findings As hypothesized, there is an insignificant main effect of economic conditions on hotel sale prices. A moderating role of economic conditions on the relationship between average daily rate (and net operating income) and market value was found, while no moderating effect was found for occupancy rate and hotel size. Results also find certain support for AVMs previously presented in the literature, as described herein. Originality/value This study attempts to make contributions to the existing lodging and real estate literature by investigating a main effect of economic conditions on hotel sale prices and a moderating role of economic conditions on the relationship between various hotel performance indicators and hotel sale prices. In addition, this study operationalizes a relatively extensive (large base sample size of 2,441 hotel sale transactions) and recent (since 2000) database compared to previous studies.

The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate

With interest rates near all-time lows in late 2015, Stanley Cirano knew it was an opportune time to consider the financing on his portfolio of commercial real estate. Cirano Properties was the general partner on three separate private equity investments of retail shopping centers in suburban Chicago. The first, Brookline Road Shopping Center, had been acquired in 2006 and had been managed through the financial crisis and real estate downturn. The property was performing well and Cirano wondered whether it made sense to refinance or sell. The second property, Columbus Festival Plaza, had been acquired in a 2010 bankruptcy auction. Although the property had needed a good amount of capital improvements, Cirano was proud of the growth in net operating income he had been able to generate. The final property, Deerwood Acres, had been developed by Cirano himself after acquiring the property in 2013 from the previous owner, who had been operating a go-cart track and drive-in theater on the land. Cirano expected great things from the property, though his lease-up had been slower than anticipated. Although the three properties had different levels of performance and presented different management issues, they all shared the fact that they were all significantly financed, in part, with debt. As the properties were acquired at different times, Cirano had simply selected what seemed like reasonable financing at the time. With his concern that interest rates would soon be rising, Cirano thought it made sense to take a holistic view of his portfolio, consider what debt options were available to him, and make a sound strategic decision on the financing of all his assets at the same time.

The Consolidated Medium-Term Income and Expenditure Framework

The medium-term income projections have been updated from the April 2015 outlook and the February review of the adequacy of precautionary balances. The main changes to the outlook stem from a more gradual rise in the SDR interest rates and lower surcharge income following the lowering of the surcharges threshold. The revised projections still show a positive forecast for net operational income (and surcharges) over the medium term, albeit lower than projected a year ago. Lending income (excluding surcharges) is marginally higher compared with earlier estimates. Surcharge income is estimated to be lower, reflecting the adjustment of the surcharges thresholds following the implementation of quota increases under the 14th General Review. Projected income from the Fixed-Income Subaccount of the Investment Account and interest-free resources are expected to increase more gradually over the medium-term as market indicators now point to a slower rise in interest rates from their current low levels. The expenditure path includes an increase in real terms of about ½ percent in the net administrative budget for FY 2017 to accommodate rising costs for physical and IT security. Moreover, reflecting further upward pressure over the medium term and uncertainty about the scope for offsetting savings, the traditional baseline assumption of a constant real spending envelope in the outer years is complemented by an alternative scenario with a further moderate spending increase of 1½ percent, phased in over FY 2018–19. In addition, a lower projected U.S. dollar/SDR exchange rate increases the expenses in SDR terms.

HotelTonight usage and hotel profitability

PurposeThe purpose of this study is to empirically evaluate the influence of a hotel’s listing on the last-minute hotel booking app, HotelTonight, and average daily rate (ADR) on the hotel’s net operating income (NOI). The study examines the mediating effect of hotel occupancy rate on the relationships between ADR and hotel app usage in terms of NOI.Design/methodology/approachThe data for the study was graciously provided by Smith Travel Research, Inc. for 80 hotels located in the top Florida destinations listed on the HotelTonight app. Hierarchical multiple regression with a mediation effect was used in the study to test the mediating effect of occupancy between hotel app usage and ADR with NOI.FindingsThe research results show a positive association between a hotel’s HotelTonight listing and ADR in terms of its NOI. Occupancy is found to have a full mediation effect between a hotel’s usage of the mobile app and NOI.Originality/valueMobile apps that specialize in last-minute hotel bookings have proliferated in recent years by providing hotels a mobile platform to increase hotel occupancy. However, there is a dearth of studies examining the effect these apps have on a hotel’s bottom line profitability or NOI.

Examination of Potential Misrepresentation in CMBS

Although CMBS suffered large scale losses during the past financial crisis, currently, this segment of the structured finance market has almost recovered to its pre-crisis level. While evidence was found regarding the systematic misrepresentation of loan quality information in residential mortgages, there was no evidence of large scale misreporting in CMBS. This paper examines important financial variables reported in commercial mortgages such as Underwritten Net Operating Income (UWNOI). I find that, prior to the financial crisis, UWNOI was consistently over-estimated by an average of 7.8%. This overstatement leads to Loan-to-Value ratio and Debt-Service Coverage Ratio being misreported as 67.1% from 84.2% and DSCR as 1.72 from 1.59. The levels of aggregate over-estimation substantially differed among originators and the variations explained the performance differences between originators. Each 1% increase in over-estimation resulted in a 20% higher likelihood in delinquency. The ratings issued by rating agencies failed to capture the adverse impact from over-estimation on CMBS performance.

Social Impact and Sustainability of Corporate Social Responsibility in the Banking Sectors: Bangladesh Perspective

In the recent years Corporate Social Responsibility (CSR) has witnessed a tremendous increase in awareness and control in the global arena. It is a concept where business organizations apart from their profitability and growth show interest in societal and environmental welfare by taking the responsibility of impact of their activities on stake holders, employees, shareholders, customers, suppliers, and civil society. However, in developing nations the situation of CSR activities of financial institutions is not so flourishing. The aims of this study are to investigate the Corporate Social Responsibility (CSR) activities performed by ten commercial banks in Bangladesh and explore the potential social impacts and sustainability in the future. This study also traced to find the relationship among operational performance by contributing CSR activities. CSR activities affect social attention to the customers and related stakeholders. It shows the relation between after tax net operating income and CSR expenditures by banks using SPSS software. JEL Classification Code: M14

Banks: Deterioration of Assets Quality and Earnings Reduction

In 2015, deterioration of bank assets quality and reduction of profitability obtained from net operating income have led to a drastic fall of bank earnings. This deprived the banking sector of the main source of capital base replenishment while capital adequacy level was close to a critical point. Up to the end of summer 2015, bank capital growth was mainly true of major banks. As a result, while the banking sector was increasing capital base the significant number of banks still operated with insufficient bank stock to sustain further deterioration of assets quality without the additional support.

Экономико-географические подходы к оценке сельскохозяйственных угодий

В статье проанализирована территориальная организация и особенности использования сельскохозяйственных угодий бассейна реки Селенга. Дана краткая характеристика структуры посевов; рассчитаны показатели земельной ренты пахотных угодий на основе доходного подхода. Сельскохозяйственные угодья бассейна реки Селенги относятся к основному земледельческому ареалу Республики Бурятии, история освоения которого насчитывает более трёх веков. На долю районов, входящих в водосборную площадь бассейна, приходится 73,7 % валовой продукции сельского хозяйства республики, 83,1 % сельскохозяйственных угодий, в том числе 86,4 % пашни. Анализ особенностей использования сельскохозяйственных угодий проведён на основе статистических данных и материалов полевых исследований; исходные данные для расчёта земельной ренты взяты из годовых отчётов сельскохозяйственных организаций. При расчёте земельной ренты использован доходный подход, предполагающий расчёт средней величины чистого операционного дохода, образующегося при ведении сельскохозяйственного производства. При оценке величины чистого операционного дохода, получаемого с пахотных угодий, исходили из фактически сложившегося севооборота. Ведущей культурой в структуре посевов исследуемой территории является яровая пшеница. Земельная рента (совокупный доход) пахотных угодий определялась как суммарная величина из чистых операционных доходов, полученных при выращивании зерновых культур. Сложившиеся в последнее десятилетия севообороты с высокой долей зернофуражных культур и пшеницей мягких сортов приносят коллективным хозяйствам большинства районов прибыль, поэтому для оптимизации системы сельскохозяйственного землепользования необходимо остановить продолжающуюся тенденцию сокращения пахотных угодий. В животноводстве в структуре стада преобладают крупный рогатый скот пастбищного содержания.

The Consolidated Medium-Term Income and Expenditure Framework

The medium-term income projections have been updated since the last estimate provided to the Executive Board in April 2014. The main changes to the outlook stem from a lower path for credit outstanding and expectations for a more gradual rise in interest rates. The revised projections show lower levels of net operational income over the coming years. Lending income is lower compared with earlier estimates as a result of lower credit levels, including the advance repurchases by Ireland and Portugal. Non-lending income is also projected to be lower reflecting a further downward shift in SDR interest rates and, thus, returns on investments and interest-free resources. The updated expenditure path assumes the net administrative budget remains constant in real terms at the FY 2012 level. The long-run projections indicate a broad balance between income and expenditures, assuming that interest rates rise to 3.5 percent and with lending returning to pre-crisis levels. The pace of reserve accumulation is expected to slow, reflecting the decline in Fund credit, and precautionary balances are now projected to remain slightly below the projected target of SDR 20 billion over the medium term compared with the earlier estimates.

Default and prepayment modelling in participating mortgages

Abstract Since the 2008 financial crisis, the mortgage market has been renovating its tools and instruments in order to avoid a new crisis. One such innovative instrument is the participating mortgage, in which the lender gains part of the net operating income and/or future appreciation. In this paper, we establish a financing model for participating mortgages, incorporating early termination options such as default and two prepayment clauses, defeasance and prepayment penalty. Later, we illustrate a detailed sensitivity analysis of the model. The values of early termination options depend on the choice of parameters in the model, as well as the term structure of short term rates. Finally, we show that a participation rate of 11.24% results in zero mortgage interest rate using the parameters in our simulation.

The Comparative Value Relevance of Accounting Earnings, Book Value, Net Cash Flows, Operating Income, and Net Operating Cash Flows in Listed Korean Stock Markets

This paper explores the comparative value relevance of book value, accounting earnings, net cash flows, operating income, and net operating cash flows in listed Korean stock markets from 2000 to 2013. Especially this study classifies sample data into several subgroups according to firm size (large enterprise vs. small and medium-sized enterprises), financial markets (KOSPI vs. KOSDAQ), technology level (high technology companies vs. low technology companies), and economic conditions (before and after global financial crisis) to examine the value relevance change among main variables. The empirical evidence of this paper shows that net cash flows are most value efficient for the small and medium-sized, KOSDAQ, high-tech, low-tech, and pre-GFC groups, while operating income ranks first for the big firm, KOSPI, and post-GFC groups; accounting earnings are the least value-relevant for the high-tech, low-tech, and pre-GFC groups. Net cash flows are the most value-relevant factor before the GFC and the least after it. These results suggest that the comparative value relevance of book value, accounting earnings, net cash flows, net operating cash flows, and operating income mainly depends on firm size, financial market, technology level, and the GFC in listed Korean stock markets.

Avaliação do risco regulatório em pesquisa & desenvolvimento no setor elétrico brasileiro

O artigo propõe metodologia de avaliação ex-ante de projetos de P&D&I do setor elétrico, incorporada a uma ferramenta de análise multicritério, com foco em risco. A P&D do setor elétrico é regulada pela Agência Nacional de Energia Elétrica (ANEEL) e obriga as empresas a investirem parte de sua Receita Operacional Líquida (ROL) em P&D&I. A imposição de P&D&I ao setor levou suas empresas a buscarem formas de alocar recursos em projetos que tentam harmonizar o contexto regulatório com seus direcionadores de mercado, forçando-as a estruturarem em suas rotinas uma gestão da inovação que mitigasse riscos regulatórios. Uma forma de se viabilizar essa mitigação é o uso de metodologias de seleção de projetos capazes de ponderar múltiplos elementos, de certo modo, antagônicos. A PiTech, Prioritization in Technology, é uma ferramenta de análise multivariada paramétrica, flexível e propícia a essa ponderação. Neste artigo, aplicaram-se critérios operacionais, mercadológicos e regulatórios, em múltiplas combinações, para 19 projetos de um grupo empresarial de energia elétrica. A ferramenta mostrou-se útil ao permitir aos tomadores de decisão verificarem a pertinência de investimento em 16 projetos, totalizando R$ 61 milhões em 2010, com riscos de glosa minimizados e concomitante aderência a interesses empresariais.

Determinants of Hotel Property Prices

Pricing commercial real estate has its foundations in present value theory. Recent improvements for accessing transaction data have stimulated interest in commercial property hedonic pricing models, the structures of which follow traditions in single-family real estate in that the implicit prices of property characteristics and site-specific variables represent city and national market conditions. Adding present value variables has become increasingly common to account for general market conditions. We test two hedonic pricing models; one that follows the residential tradition and another that departs by incorporating city-specific net operating incomes and the discount rates. Modeling prices in these alternative ways allows for recognition of the relative contributions of property, city, and capital market determinants. Empirical testing relies on a sample of hotel transactions from 2005–2010. The responsiveness of hotel cash flows to market changes is an important consideration. We find that models with property characteristics perform about the same as models that also include present value variables. A plausible explanation for this phenomenon is that implicit prices corresponding to property characteristics and site-specific variables appear to reflect income streams associated with city and nationwide economic conditions.

The Dual Use of Residual Income and Discounted Cash Flow Valuation Methods by U.S. Sell-Side Equity Analysts

We study the use of residual income (RI) valuation methods by U.S. sell-side equity analysts, particularly as compared to DCF. We document that RI valuations are rare — just 1/16th as common as DCF — and that different RI and DCF valuations are not infrequently provided by the same analyst for the same firm in the same report. We find that while analysts build their RI models around both net operating income (RNOA-RI) and net income (ROE-RI), analysts’ RNOA-RI valuations are as optimistic as their DCF valuations and contain RNOAs that increase to an economically implausible terminal year median of 27%. In contrast, analysts’ ROE-RI valuations contain ROEs that decline over the forecast horizon to a more plausible terminal year median of 17%. While optimistic when done on their own, analysts’ ROE-RI valuations are unbiased when done in tandem with DCF, as are the DCFs that accompany them.

Social Impact and Sustainability of Corporate Social Responsibility in the Banking Sectors: Bangladesh Perspective

In the recent years Corporate Social Responsibility (CSR) has witnessed tremendous increase in awareness and control in the global arena. It is a concept where business organizations apart from their profitability and growth show interest in societal and environmental welfare by taking the responsibility of impact of their activities on stakeholders, employees, shareholders, customers, suppliers, and civil society. However, in developing nations the situation of CSR activities by financial institutions is not so flourishing. The aims of this study are to investigate the Corporate Social Responsibility (CSR) activities performed by ten commercial banks in Bangladesh and explore the potential social impacts and sustainability in the future. This study also traced to find the relationship among operational performance by contributing CSR activities. CSR activities affect social attention to the customers and related stakeholders. It shows the relation between after tax net operating income and CSR expenditures by banks using SPSS software.

Default and Prepayment Modelling in Participating Mortgages

Since the 2007 financial crisis, the mortgage market has been renovating its tools and instruments in order to avoid a new crisis. One such innovative instrument is the participating mortgage, in which the lender gains part of the net operating income and/or future appreciation. In this paper, we establish a financing model for participating mortgages, incorporating early termination options such as default and two prepayment clauses, defeasance and prepayment penalty. Later, we illustrate a detailed sensitivity analysis and get practical results. The values of early termination options depend on the choice of parameters in the model, as well as the term structure of short term rates. Finally, we show that a participation rate of 11.24% results in zero mortgage interest rate using the parameters in our simulation.