Showing papers on "Cash flow forecasting published in 2021"

Australian evidence on analysts' cash flow forecasts: issuance, accuracy and usefulness

Abstract: This study examines the factors affecting the issuance, accuracy and usefulness of analysts' cash flow forecasts (CFFs) in Australia. Given the economic importance of the mining industry in Australia, we find that analysts are likely to provide CFFs for mining firms with poor financial health and high default risk. In contrast, analysts' provision of CFFs increases with the degree of financial health for non‐mining firms. The determinants of the issuance and accuracy of analysts' CFFs also differ in pre‐ and post‐IFRS adoption periods. Our results add new evidence on the effect of IFRS adoption on analysts' cash flow forecasting behaviours.

How do reputation, structure design and FinTech ecosystem affect the net cash inflow of P2P lending platforms? Evidence from China

Abstract: Based on daily data of 749 active online P2P lending platforms in Chinese market, this study explores the key factors affecting the net cash inflow rate of the platform which is vital for its operation and survival from the perspective of reputation, structure design and FinTech ecosystem. Internal governance issues of P2P lending platforms are further discussed according to the model results. A positive U-shaped relationship has been found between the platform duration and its net cash inflow rate which proves the role of reputation in the long-term development of P2P lending platforms. In addition, we demonstrate that both capital and operational structure design of the platform (e.g. shareholders background, credit assignment, trusteeship and guarantee) have a significant impact on the platform’s net cash inflow rate. The cash flow level of the platform has also been affected by the regional FinTech ecosystem. Platforms in a medium-developing ecosystem may have the highest net cash inflow rate, while a backward ecosystem will lower the cash flows of the platforms located in this area on average. Some suggestions on cash flow management and internal governance of P2P lending platforms for both platform founders and governments are put forward in the end of the study.

Examining the determinants and consequences of financial constraints faced by Micro, Small and Medium Enterprises' owners

Abstract: The Micro, Small and Medium Enterprises (MSMEs) counter numerous financial obstacles concerning business financing and cash flow management. The study, therefore, intends to examine the level of perceived severity of financial constraints on the business growth of enterprises, in terms of sales, profitability and asset growth. An attempt is made to study the influence of owner and firm attributes as the determinants of financial constraints faced by MSMEs.,The data were collected from MSME owners of Northern India through a self-administered questionnaire. In total, 213 responses were analysed using partial least squares-structural equation modelling (PLS-SEM) technique through SmartPLSv2.,The findings advocate the role of owner and firm attributes in the severity of financial constraints experienced by the MSME owners. Most importantly, the study establishes a strong link between owner and firm attributes and cash flow constraints. Further, the paper confirms the negative influence of financing and cash flow problems on the growth of the firm.,The evaluation and categorisation of perceived financial challenges into meaningful dimensions generate value to the problematic area of MSME operations. Thus, the findings are useful for the policymakers and researchers to contemplate the financial vulnerability of MSMEs.,The empirical findings of the present study add worth to the limited evidence of the relationship between owner and firm attributes and severity of cash flow constraints faced by the Indian MSME owners.

Cash flow management techniques practices of local firms in Nigeria

Abstract: This article assessed the perceptions of local construction firms (LCFs) on cash flow management techniques (CFMT) practices with the aim of drawing out relevant inferences that will improve firms’...

Managerial discretion to delay the recognition of goodwill impairment: The role of enforcement

Abstract: Under International Financial Reporting Standards, managers can use two approaches to increase the estimated fair value of goodwill in order to justify not recognizing impairment: (1) make overly optimistic valuation assumptions, and (2) increase future cash flow forecasts by inflating current cash flows. Because enforcement constrains the use of optimistic valuation assumptions, we hypothesize that enforcement influences the relative use of these two choices. We test this hypothesis by comparing a sample of 1,958 firms from 36 countries that are likely to delay recognizing goodwill impairment (suspect firms) to a sample of control firms. First, we find that firms in high‐enforcement countries use a higher discount rate to test goodwill for impairment than firms in low‐enforcement countries. We also find a more positive association between discount rate and upward cash flow management for suspect firms than for control firms. This result is consistent with suspect firms substituting optimistic valuation assumptions with inflated current cash flows. Second, we find that, relative to control firms, suspect firms exhibit higher upward cash flow management in high‐enforcement countries than in low‐enforcement countries. Third, we show that suspect firms in high‐enforcement countries are more likely to eventually impair goodwill.

Modeling and Management of Power Supply Enterprises’ Cash Flows

Abstract: The purpose of the study is to assess the efficiency of cash flow management at power supply companies of the CIS (Commonwealth of Independent States) countries. A methodological approach to cash flow forecasting with the use of linear and polynomial regression has been developed. The study is based on the data provided by 12 power supply companies operating in CIS member countries. Forecasting based on the generated polynomial models of multiple regression of cash flow for the power supply companies under study confirms the strong possibility of extrapolating the studied trends to future periods. Compared to the linear model, the polynomial one confirms higher values of the determination coefficients for the majority of power supply companies. The projected volumes of cash inflow, cash outflow, and net cash flows of power supply companies with the application of the described polynomial multiple regression models have a fairly high degree of approximation. The correlations between operating cash flows and outflows, between total cash inflow and outflow of the majority of power supply companies are high. The low level of synchronization between cash inflows and outflows of the companies under study is associated with the specifics of their financial and investment activities and the cash flow management policy. It has been proven that energy enterprises’ financial stability significantly depends on the synchronization and uniformity of cash flows. The proposed methodological approach allows identifying enterprises by the criterion of riskiness from the standpoint of the synchronization and homogeneity of their cash flows.

Developing a novel cash flow risk analysis framework for construction projects based on 5D BIM

Abstract: Cash flow management through analyzing various scenarios is still a problem for contractors, yet it is of paramount importance, with direct implications for the success of projects. Recent developments in the field rely on complicated procedures that necessitate the integration of Building Information Modeling (BIM), coding procedures, and advanced cost estimation approaches. The field requires simple theoretically-sound procedures that are easy to adopt and BIM-compatible. This study sought to address this requirement by offering an innovative framework, workflow, and logical operation for cash flow management with BIM. The proposed framework is capable of: (1) accurately estimating the cash flow of projects, taking account of payment patterns for materials, equipment, human resources, and sub-contractors, as well as contract-related attributes and (2) assessing the impacts of important risk factors on the cash flow of projects. In methodological terms, the procedure followed by the study is to develop a proof of concept (PoC). A case project in Iran is used to validate the proposed framework and to assess its practicability in real-life contexts. The study would appeal to researchers by providing the theoretical foundations and logical procedures for a BIM-enabled framework and extending the body of knowledge on cash flow management of construction projects. For the world of practice, the study findings establish the accuracy and workability of the proposed framework in enabling contractors to predict possible cash flows and make appropriate decisions when managing construction projects.

PhD CEOs and firm performance

Abstract: This paper investigates the relationship between the education of a CEO and firm performance and provides robust evidence that firms led by CEOs with PhDs outperform their peers. We find that CEOs with PhDs increase firm performance by 3.03% while CEOs with a PhD from a highly ranked university increase firm performance by 4.65%. Our results are robust to endogenous CEO selection, transition firms, alternative rankings, unobserved firm characteristics and the network of the CEO. We also show that the increase in firm performance is due to a tighter control of costs and superior cash flow management.

Everyday Life of Accounting Disclosure – Exploring Home Accountants’ Practices in Indonesia

Abstract: The study intends to identify the accounting practices used at home –budgeting, record keeping and the use of the information for decision making related to home affairs. Exercising exploratory research, this study using accounting academics as well as accounting practitioners as informants. Data are collected mostly from informal interviews and a focus group discussion with ten informants. All of them are peer and close friends of the researcher. The analysis is conducted manually by tracing all interview transcripts and comparing the transcripts with secondary data from the informants. The study found that accounting practices at home tend to be dominated by financial management that focuses on cash flow management. Budgeting and record keeping are addressed mostly to manage cash flows in order to avoid deficit and to make long-term investment .

The meaning of cash flow management for the non-bank housing developers

Abstract: This study aims to investigate in more depth the meaning of cash flow management carried out by bank-less housing practitioners. This research, which uses Islamic phenomenology, involves Muslim practitioner informants trying to operate their business to comply with various sharia provisions and scholars informant who knows the bank-less housing business both in practice and the Islamic law. The findings indicate that cash flow means; (1) both material and non-material; (2) obedience to the implementation of cash flow management solutions in Islam; (3) creativity in cash flow management activities based on priority (compulsory, sunna, permissible); (4) justice obtained through muamalah contracts; (5) sharia oriented through the obligation to continue to communicate with the scholars.

Business management in the football industry from a supply chain management perspective

Abstract: To understand the football industry in its entirety, a supply chain management (SCM) approach is necessary. This includes the study of suppliers, consumers and their collaborations. The purpose of this study was to present a business management model based on supply chain management.,Data were collected through in-depth interviews with 12 academic and executive football experts. After three steps of open, axial and selective coding based on grounded theory with a paradigmatic approach, the data were analysed, and a football supply chain management (FSCM) was developed. The proposed model includes three managerial components: upstream suppliers, the manufacturing firm, and downstream customers.,The football industry sector has three parts: upstream suppliers, manufacturing firm/football clubs and downstream customers. We proposed seven parts for the managerial processes of football supply chain management: event/match management, club management, resource and infrastructure management, customer relationship management, supplier relationship management, cash flow management and knowledge and information flow management. This model can be used for configuration, coordination and redesign of business operations as well as the development of models for evaluation of the football supply chain's performance.,The proposed model of a football supply chain management, with the existing literature and theoretical review, created a synergistic outcome. This synergy is presented in the linkage of the players in this chain and interactions between them. This view can improve the management of industry productivity and improve the products quality.

Automated Data Processing of Bank Statements for Cash Balance Forecasting

Abstract: The forecasting of cash inflows and outflows across multiple business operations plays an important role in the financial health of medium and large enterprises. Historically, this function was assigned to specialized treasury departments who projected future cash flows within different business units by processing available information on the expected performance of each business unit (e.g. sales, expenditures). We present an alternative forecasting approach which uses historical cash balance data collected from standard bank statements to systematically predict the future cash positions across different bank accounts. Our main contribution is on addressing challenges in data extraction, curation, and pre-processing, from sources such as digital bank statements. In addition, we report on the initial experiments in using both conventional and machine learning approaches to forecast cash balances. We report forecasting results on both univariate and multivariate, equally-spaced cash balances pertaining to a small, representative subset of bank accounts.

Cash flow management by contractors

Abstract: The paper focuses on various cash flow management techniques selected and incorporated by contractors into their daily processes and the effects of poor cash flow management on their business. A quantitative research approach was used using a web-based questionnaire. The questionnaire was distributed to all contractors registered with the Master Builders Association within the Eastern Cape Province. Results revealed that majority of contractors successfully implement cash flow management techniques and are therefore able to meet their monthly obligations. Respondents further agreed that late payments are detrimental in terms of their cash flow causing project delays. Increased capital expenses and higher levels of competition in the construction industry market, force the construction companies to consent to an increased number of risks, effectively ensuring their vulnerability to negative impacts on their cash flow and inevitably exposure to unforeseen events that are innate in any construction project. The study was limited to the Eastern Cape region, therefore reducing the targeted population and number of responses. The study investigated the competency level of financial management by building contractors with reference to the implications caused by poor financial management on the contractual parties involved within a project. The aim of the study was to deduce the extent to which contractors in the Eastern Cape implemented effective cash flow management techniques to sustain their businesses. The study highlighted the link between factors negatively impacting cash flow and its subsequent cause of failing contractors within the construction industry. The paper responds to the conference theme given that the effective cash flow management by contractors within their own firms and pertaining to construction projects, promotes the sustainability of the Built Environment.

Optimization of profitability and liquidity for residential projects under debt and equity financing

Abstract: An appropriate space allocation among different residence types gives higher profitability and liquidity for cash flow management in real estate projects for developers. Thereby, a balance between debt and equity should be kept for capital formation in developers where high level of cost, profit and risk exists. The purpose of this paper is to provide cash flow optimization under debt and equity financing while providing an appropriate space allocation of residence types via synchronous consideration of profitability and liquidity.,A novel optimization methodology that includes project financing, optimization and experimental design modules is proposed. The first module, project financing, considers the flexibility of utilizing one or both of debt financing and equity financing when making capital. The optimization module addresses space allocation among different residence types for a construction while maximizing profitability and liquidity using two mixed-integer linear programming models in a pre-emptive manner. The experimental design module assesses the effects of decisive parameters within the methodology via multivariate analysis of variance (MANOVA).,The proposed methodology is applied to a real-life residential project in Istanbul. The optimization module yielded 42.5% profitability via the first linear programming model and 2.2% trade-off between liquidity and profitability while minimizing the payback period by the second linear programming model. Meanwhile, MANOVA results showed that profit per square meter and sale rate trends are the most prominent factors considering their significant effects on net present value and payback period.,To the best knowledge of the author, related papers focused only on profitability under equity financing. Liquidity (as an objective) and equity financing (as a financing method) have not been handled. Hence, this paper not only performs profitability and liquidity-oriented cash flow optimization under debt and equity financing but also optimizes space allocation of residences for the first time.

Analysis of financial technologies as a tool for sustainable development

Abstract: The organization of the finance area is a challenge for companies in any sector. Balancing costs and income is one of the prerequisites for those looking for better profit margins, but it requires the administration of various aspects that do not always fit into a simple financial equation. Different processes and possibilities need to be explored. As you can see, money is the main character in this section. Here you will find articles on the organization of the income and expenses of your business. Working capital (also called working capital), bank credit, cash flow management and taxes are also topics covered in our practical advice. Some recommendations related to accounting are also presented. All this to help you perfectly control the financial operations of your company. And allow you to adapt the equipment and resources so that finances are in order and can consolidate the results and achievements of the rest of your business.

Early-Stage and Debt-Free Startups

Abstract: Startups are typically debt-free since they are unable to produce positive cash flows or to provide adequate asset-backed guarantees in the first years of their life. Raised capital is so mainly represented by equity, and its monetary component is the cash reservoir that keeps the firm alive until it reaches a liquidity surplus. Cash flow forecasting is crucial to estimate the financial breakeven (runway cash flow), combining the EBITDA generated (or absorbed) by the startup with its change in net working capital and CAPEX. The unlevered features of the startup imply that its opportunity cost of capital is represented just by the cost of collecting equity. In accounting terms, the EBIT tends to coincide with the net result of the income statement (in the absence of debt service and taxes, due to a negative tax base), and the operating cash flow with the net cash flow. When the startup reaches maturity and financial breakeven, it can start raising debt, so increasing its financial leverage. This represents a mighty milestone that can be reached only by the firms that survive Darwinian selection, bypassing the “Death Valley” (that indicates cash- and equity- burnout), and overcoming the “winter of capital.”

One-Dimensional Chaotic Function for Financial Applications Using Soft Computing Techniques

Abstract: Cash forecasting is essential as a delay in process could lead to dissatisfaction of customers in financial organization To maintain the actual cash requirement without any financial loss is difficult Particle swarm optimization (PSO) enhanced the efficiency to converge the dataset and it will be easier to fall into local optima might prove fatal Hence, chaotic system has been introduced to significantly enhance the interpretation toward cash management model for any financial organization In the proposed study, one-dimensional chaotic-particle swarm optimization (CPSO) functions were used to improve the search strategy in the given problem space to yield the optimal values The experimental analysis was made using chaotic sequence which shows the effectiveness of our proposed approach Hence, the proposed methodology has the ability to increase the convergence rate without premature convergence

Research on the Optimal Management of Cash Holding in Mature Period of Smes in China

Abstract: With the change of business objectives, cash holding management has become the center of modern enterprise financial management. Due to the different scale and stage, the cash holdings and management characteristics of enterprises are also different. This article summarizes the development context of the theory of cash holdings of small and medium-sized enterprises in the mature period, as well as the existing "common problems" and related countermeasures, as a theoretical reference for the demanders of case analysis.

The Effect of Research, Development and Innovation (RDI) on Companies’ Financial Activity Capabilities: A Case Study of SME-Companies in Finland

Abstract: One of the most concrete tools to estimate research, development and innovation (RDI) investments is cash flow earnings simulation, which estimates return on capital employed. The simulation of cash flows earnings enables a comparable assessment of the returns on various investments related to research, development and innovation. It also facilitates the presentation of profitable research and development projects. This article describes why cash flow earnings is excellent way to predict the success of the coming RDI-Investment and reduce the risk of investment to fail and how to utilize it. In addition, the article also gives insights how the attitude towards RDI affected to the cash flow earnings on several Finnish SME-companies.

Developing a Parametric Cash Flow Forecasting Model for Complex Infrastructure Projects: A Comparative Study

Abstract: Forecasting the cash flow for infrastructure projects has not received much attention in the existing models. Moreover, disregarding the cost flow behaviour and proposing models that entail a relatively high dimensionality of inputs have been the main drawbacks of the existing models. This study proposes a heuristic cash flow forecasting (CFF) model for infrastructure projects, and it explores the underlying behaviour of the cost flow. The proposed model was validated by adopting a case study approach,the actual cost flow datasets were mined from a verified data system. The results invalidated the employment of a dominant heuristic rule with regard to a cost-flow-time relationship in infrastructure projects. On the other hand, a mathematical parameter-based comparison between the trends analysed from previous studies revealed that the cost flows of infrastructure projects procured through a design-bid-build (D-B-B) route behaved in a similar manner to building projects procured through a construction management route. This research contributes to the body of knowledge providing a method to enable infrastructure contractors to accurately forecast the required working capital through adding a new dimension for project classification by coining the term “the quaternary flow percentage”. In addition, this study indicates the importance of identifying the impact of root risks on the individual cost flow components rather than on the aggregated cost flow, which is a recommendation for future research.

Are Analysts Really Optimistic in Their Stock Recommendations? The Case of the Polish Capital Market

Abstract: This paper examines the relation between the quality of forecasts and the types of analysts’ stock recommendations. Using hand-collected data on stock recommendations issued for companies listed on...

Application of break-even analysis for identifying break-even point for a proposed start-up

Abstract: This is a study of proposed start-up for knowing its break-even point. There are numerous start-ups that they begin with but fails ultimately. Out of total start-up efforts, percentage of successful start-ups are low. Indian start-up, face many problems. They are decision making, facing the criticisms, finding customers, time management, dealing with the unknown and self-doubt, hiring employees, team building & most importantly financial & cash flow management. The attempt is made here to know break-even point for a proposed business proposition made by start-up founders, who approached analysist for knowing the break-even point for their start-up.

An Empirical Study of Management of Cash Flow in SMEs and Organization

Abstract: Present day management in SMEs accepted that cash flow management as one of the most significant instruments for checking and controlling the typical working of the business. Adequate cash flow management depends on the best possible gathering cash flow management and its understanding. To decide the ampleness of the utilization of this report and the significance connected to overseeing cash flows, as all around relevant information and aptitudes, research was acted in nearby SMEs through an overview. The impact of various profiles cash needs of SMEs according to various parts of the examination of the cash flows. The outcomes show that respondents with nonstop and occasional profiles cash needs have agreeable information regarding the matter research and the perspectives that are totally or halfway positive concerning: future cash flows as a significant determinant of the estimation of the endeavor, the places of complementarity articulations of cash flows in analyzed to the pay articulation and accounting report. SMEs that are not profiled your cash needs in the poll expressed conflict with the above sections, which speaks to an announcement of their deficient degree of information on the cash premise of financial detailing. Illiquidity of the household economy and the current circumstance direct the need of raising the nature of information and aptitudes in overseeing cash flows dependent on quality articulations of cash flows and going with examination.

Development of conceptual model of project value dynamics analysis in conditions of uncertainty

Abstract: A conceptual model for analyzing the dynamics of the value of the project, achieved as a result of engineering, under conditions of uncertainty has been developed. In the methodological context, the proposed approach is based on an array of isovalues, each of which corresponds to its own level of optimism in forecasting the cash flow for the project. With the increase in the efficiency of the project due to engineering, the entire array of iso-value lines’ changes its geometrical position, moving further from the origin (in the four-dimensional space "time-benefit-cost-risk"). The proposed model includes three stages. At the first stage, input information is collected and the corresponding analysis is initiated. The result of the second stage is a multivariate cash flow forecast and calculation of the benefit-cost ratio (BCR) and its changes for each scenario. The third stage provides the calculation of the expected BCR and its change, an assessment of the risk of making an erroneous decision and changing this risk as a result of the engineering session. The model makes it possible to calculate the achieved proportion of the static and dynamic vectors of change in the value of the project, which is one of the key manifestations of the scientific novelty of the work. In the example considered, the share of the dynamic vector of growth in the value of the project was found to be 35.47 %. The model has an environmental property - the assessment of the success of value engineering under conditions of uncertainty is carried out on the basis of the annual total benefits and the annual total costs throughout the project cycle. Thus, the analysis takes into account the impact of the project on the environment, which is reflected in the risk assessment. The given case testifies to the feasibility of applying the model in the practice of engineering the value of construction projects.

The Predictive Ability of Quarterly Financial Statements

Abstract: A fundamental role of financial reporting is to provide information useful in forecasting future cash flows. Applying up-to-date time series modelling techniques, this study provides direct evidence on the usefulness of quarterly data in predicting future operating cash flows. Moreover, we show that the predictive gain from using quarterly data is larger for asset-heavy industries and industries with higher levels of earnings smoothness. This study contributes to the accounting literature by examining the usefulness of quarterly financial statements in predicting the realization of future cash flows. Our results help fill the gap in knowledge on quarterly financial statements and provide new insights on why the frequency of financial reporting matters. In addition, our findings have important policy implications for the ongoing debate over interim reporting requirements in multiple jurisdictions around the world.

Supervised Neural Networks for Illiquid Alternative Asset Cash Flow Forecasting.

Abstract: Institutional investors have been increasing the allocation of the illiquid alternative assets such as private equity funds in their portfolios, yet there exists a very limited literature on cash flow forecasting of illiquid alternative assets. The net cash flow of private equity funds typically follow a J-curve pattern, however the timing and the size of the contributions and distributions depend on the investment opportunities. In this paper, we develop a benchmark model and present two novel approaches (direct vs. indirect) to predict the cash flows of private equity funds. We introduce a sliding window approach to apply on our cash flow data because different vintage year funds contain different lengths of cash flow information. We then pass the data to an LSTM/ GRU model to predict the future cash flows either directly or indirectly (based on the benchmark model). We further integrate macroeconomic indicators into our data, which allows us to consider the impact of market environment on cash flows and to apply stress testing. Our results indicate that the direct model is easier to implement compared to the benchmark model and the indirect model, but still the predicted cash flows align better with the actual cash flows. We also show that macroeconomic variables improve the performance of the direct model whereas the impact is not obvious on the indirect model.

Earning Management, Agency Cost and Equity Value: Non-rent Seeking and Rent Seeking Prone Firms – Indian Evidence

Abstract: The study explores and contrasts the earning management and its nature of the non-rent seeking and rent seeking prone firms followed by their respective valuation implication in the light of agency problem (cost) in India, where rent seeking is central to the economy. The empirical results suggest that the cash flow management by the non-rent seeking firms having lesser agency cost, is likely to be beneficial from equity valuation point as the same might aid in addressing information asymmetry as to superior operating cash flow and cash flow growth. Accrual management is considered detrimental from valuation perspective for these firms- may be due to information risk of accruals. For rent seeking prone firms where agency cost is documented to be higher, both cash flow management and cost of production management are opportunistic because they are likely to be aimed at reaping private benefit, as such, both have an inverse relation with the equity value.