Showing papers on "Cash flow forecasting published in 1987"

Cash Flow in Bankruptcy Prediction

Abstract: 0 Users of financial statements have been showing an increased interest in cash flow information [e.g., 13, 27]. In lieu of disclosures from companies that detail actual cash receipts and disbursements, users have had to derive their own estimates based upon the available financial disclosures [e.g., 7, 10, 18]. Empirically, Gombola and Ketz [15, 16, 17] have examined the similarity among several asset flow measures: income from operations, income plus depreciation, working capital from operations, and cash flow from operations (CFFO). CFFO was obtained by adjusting income from operations for all accruals. They found that income plus depreciation and working capital from operations, though frequently labeled "cash flow," were more similar to earnings. Via factor analysis, Gombola and Ketz found that there generally was a return factor on which income from operations, income plus depreciation, and working capital from operations all loaded heavily. They also generally obtained a separate cash flow factor, thus providing empirical evidence that if one wanted CFFO one had to adjust for all of the accruals.

Re-Examining the Buffer-Stock Model of Money

Abstract: This paper critically examines recent papers in the buffer stock or supply side disequilibrium models of money. The paper first investigates the assumptions at the m icroeconomic level and concludes that even with these assumptions, aggregate behavior does not necessarily follow buffer-stock models in which excess cash balances are held involuntarily. In a simple model with uncertain cash flows, it is shown that in the aggregate short-run involuntary cash holdings are negligible. If the buffer-stock story is applicable, it is to a broader definition of money than used in most empirical work. The second part of the paper examines empirical work and argues that the buffer-stock idea cannot be implemented using single equation techniques, and that when viewed appropriately, current empirical result s refute the buffer-stock idea as it is currently modeled. Copyright 1987 by Royal Economic Society.

The Interaction between Derivative Securities on Financial Instruments and the Underlying Cash Markets: An Overview

Abstract: Trading in financial futures and options has come to play such an important role in the U.S. financial markets that it is surprising to recall that these markets are less than 15 years old. Many have been in existence for less than five years, and new futures and options markets are constantly being introduced. The introduction and immediate success of markets in “contingent claims” has transformed the U.S. financial system. Supporters point to benefits resulting from the fact that financial futures and options greatly expand the range of strategies for risk management available to investors. But others express concern that trading in these instruments may interfere with the smooth operation of existing financial markets. The objective of this paper is to sketch the role of contingent claims in the overall financial market system and to describe the interaction between these markets and those for the underlying securities. Section I1 begins with a discussion of “market completeness” and shows how this theoretical concept applies to the contribution of futures and options contracts to a financial market. The third section covers their role in hedging and, more generally, risk management. In Section IV, the impact of futures and options trading on real capital formation is briefly discussed; it is inherent in the nature of such “assets market” transactions that they do not compete for resources that might otherwise be devoted to real investment. The next two sections describe the interaction between price behavior in contingent claims and their underlying cash markets. The markets are

The effect of sales and collection disclosures on cash flow forecasting and income smoothing

Abstract: . Based on a model of sales and collection events of a firm, this paper analyzes the effect of different levels of disclosures about the two events on cash flow forecasting and income smoothing. A comparison of disclosure of credit sales from the sales accrual method and disclosure of cash collection from the cash collection (installment) method shows that when cash flows occur in a period subsequent to sales realization, the cash flow forecasts from earnings based on the sales accrual method are superior to forecasts from earnings based on cash collection. This is because the sales accrual method provides information on management's expectations about future cash flows. The analysis also shows that, for a similar reason, earnings based on the sales accrual method can be expected to be generally smoother than earnings based on the cash collection method. The model is also examined through a simulation study of a firm for a variety of parameter values. Resume. Fonde sur un modele des evenements de vente et de recouvrement d'une societe, cet article analyse l'effet de divers niveaux de divulgation de ces deux evenements sur la prevision de tresorerie et le lissage des benefices. Une comparaison de la divulgation des ventes a credit selon la methode de comptabilite d'exercice et de la divulgation des recouvrements selon la methode de la constatation des profits au prorata des encaissements, montre que lorsque les flux monetaires se produisent dans un exercice posterieur a la constatation des ventes, les previsions de tresorerie fondees sur les resultats produits par la methode de comptabilite d'exercice, sont superieures aux previsions fondees sur les resultats issus de la methode de constatation du profit au prorata des encaissements. Ceci est attribuable au fait que la methode de comptabilite d'exercice fournit de l'information sur les previsions de la direction au sujet des flux monetaires futurs. L'analyse montre egalement, pour des raisons similaires, que les resultats produits par la methode de comptabilite d'exercice seront probablement plus niveles que les resultats generes par la methode de constatation du profit au prorata des encaissements. Le modele est en outre examine par l'entremise d'une etude de simulation d'une societe pour differentes valeurs attribuees aux parametres.

A Microcomputer Program that Simulates the Baumol-Tobin Transactions Demand for Money

Abstract: This article describes an economic model dealing with the demand for money and a microcomputer program that enables students to experiment with cash-management techniques. The computer experience teaches students that money does not need to have a physical existence or earn interest to be demanded. It also teaches that abstract theories are useful even though decision makers may not consciously use the thought processes described in the theory. By simulating personal experiences, the program teaches how changes in income, interest rates, and charges for exchanging bonds and cash affect money demand. Finally, the program can be used as an illustration of the economist's problem-solving method-the construction of marginal benefit and marginal cost schedules. The program is modeled after the Baumol-Tobin transactions demand for money. The assumptions made in the program-a fixed fee for exchanging bonds for cash, interest earnings that are paid at the end of the year, and an even expenditure stream-are those made by Baumol (1952) and Tobin (1956). However, for purposes of simplicity, the program, unlike the theory, does not allow bond-cash exchanges within a month. The features such integer constraints add to the model have been analyzed by Barro (1976). The program described in this article is user-friendly. It has been written so that a cash account and a bond account can be maintained. The program requests entries for annual income, the bond rate of interest, and the fee for exchanging bonds and cash. A cash account is created for the full annual income. Any portion of the cash may be transferred to a bond account. The program records the changes in the accounts, the fee for exchanging bonds and cash, as well as the interest earnings. Each month, the program reduces the cash account by one-twelfth of annual income. If the cash account contains insufficient funds, the program forces a bond sale-and charges the fee for exchanging bonds for cash. At the end of the "year," the bond and cash accounts have been reduced to zero. The program prints a written record of the accounts, transactions, earnings, and charges. The program reports the maximum earnings possible given the interest, income, and fee entered, as well as the actual average monthly cash holdings for the year. A year's transactions can be completed in about five minutes.

Building depreciation and property appraisal techniques

Abstract: The impact of accelerating technological change in recent years has been to shorten the useful lifespan of many commercial buildings. Shorter income flows and increasing yields have resulted in a rapid descent towards site values. The response to changing investment circumstances such as this will first be reflected in the subjective investment appraisal, which will precede changes in reactive market valuation methodology. This paper presents and compares three alternative methods of appraisal which might allow explicit analysis of building depreciation. Treating the building element of property as a wasting asset akin to a leasehold is rejected for its simplistic assumptions and lack of flexibility. A cost based approach is similarly flawed. The recommended approach is an explicit cash flow projection which reflects the fact that rental growth will decline over a holding period, considering alternative resale prices based upon site value, value for refurbishment, or value if re‐let unimproved.

Cash Transfer Scheduling for Concentrating Noncentral Receipts

Abstract: Cash concentration is a routine cash management activity that concerns transfer of funds from bank accounts in remote locations to the firm's central bank accounts. Substantial savings can accrue to the company as a result of properly scheduling these transfers, i.e. determining the optimal timing and amount of cash transfers. In this paper an easy to implement model is developed to aid management in this activity. The transfer policy is shown to be a day-specific s, S policy which is amenable to efficient computerization. This result is shown to hold under a set of realistic assumptions regarding deposit patterns, various cost functions, and institutional arrangements.

Corporate Cash Management

Abstract: Following your need to always fulfil the inspiration to obtain everybody is now simple. Connecting to the internet is one of the short cuts to do. There are so many sources that offer and connect us to other world condition. As one of the products to see in internet, this website becomes a very available place to look for countless corporate cash management sources. Yeah, sources about the books from countries in the world are provided.

Cash flow planning

Abstract: The results of recent surveys of businesses indicate that cash flow is the single most important problem they face. The business press has noted that “cash‐flow planning is one of the more difficult and vulnerable areas in business management,” and that “businessmen can't understand why…they [are] running out of cash.” In fact, it's safe to suggest for companies of any size that cash is the lifeblood of the firm, and that a company's cash‐planning practices can be a critical early warning device of impending financial trouble.

Optimal liquidity in personal financial planning

Abstract: This paper investigates the question of optimal portfolio liquidity in a personal financial planning framework. The difficulties encountered in answering this question are discussed, liquidity is defined, and a variety of motives for maintaining liquidity are examined in depth. The major thrust of the paper is the development of a theoretical model of liquidity needs, which is then simplified in a stepwise manner through the inclusion of cash substitutes, need interdependence, and other devices. It is concluded that a significantly reduced liquidity needs model is hypothetically possible, permitting the planner to think in terms of substantially smaller client cash balances.

Capital budgeting strategies with uncertain cash flows

Abstract: In financial planning problems the selection of project investment when cash flows are certain has been the subject of considerable work. This paper considers optimal project sets with practical aspects involving the effect of uncertain flows using simulation to determine the confidence limit for required available funds and the probability that a chosen project set is not the best.

Spreadsheet aids for financial planning for construction projects

Abstract: Financial planning and cash flow management are difficult yet important management tasks to ensure cost-effective construction. The unavailability of adequate funding or poor financing strategies can restrict construction options, substantially increase costs, and delay project completion. Adopting innovative financing strategies for cash flow management can avoid or reduce such problems, especially when coordination of multiple funding sources is required. This paper describes a spreadsheet template useful for cash flow management including the evaluation of supplemental financing strategies such as overdrafts and revenue bonds to cover construction expenses. With the capability for simple user interaction, extensive numerical calculations, easy simulation of different options, and numerous report formats (including graphics), spreadsheets provide an excellent environment for financial planning. A spreadsheet template described in this paper provides a structure to easily and quickly employ these general capabilities; in many cases, only specific numerical information on cash flows and financing options needs to be entered for a particular application.

A Perspective on Cash Planning

Abstract: Cash planning was introduced in 1981 to take effect in the financial year 1982/83. The intention was to operate in 3-year cycles with a medium term cash plan. Therefore, an analysis of the cash outturns for the first two cash planning cycles is possible. Alternatively, the objectives of the MTFS may be viewed in the light of outturns for public spending, borrowing and taxes in relation to GDP. As was noted in Chapters 3 and 6, these GDP-based data have assumed some importance as intermediate, and perhaps ultimate, targets of the strategy. Thus there are three objectives: to establish how successful has been the aim of sticking to cash plans; to gain an impression of the volume consequences of cash planning; and to assess the pattern of GDP-based outturns for spending, borrowing and taxation.