Showing papers on "Cash flow forecasting published in 2023"

Predicting fraudulent financial statement using cash flow shenanigans

Abstract: Detection of fraudulent financial stewardship in the cash flow section is an exciting thing and is rarely studied. This research empirically tests the discovery of fraudulent financial statements based on basic cash flow shenanigans. The sample of this study amounted to 470 data mining companies in Indonesia, Malaysia, China, and Japan. The analysis method used is a positive approach. The results show that all ratios used can predict fraudulent financial statements. Three ratios of cash flow shenanigans, namely change in receivable to cash flow operations, days payable outstanding, and change in inventory to cash flow operations, significantly affect the F-Score. Meanwhile, the six cash flow shenanigans ratios, namely cash flow operations to current liability, operating cash flow ratio, free cash flow, cash flow operations to total liability, days payable outstanding, and change in inventory to cash flow operations, have a significant effect on the M-Score.

The Effect of Cash Flow Presentation Method on Investors’ Forecast of Future Cash Flows

Abstract: The decision usefulness of the direct versus indirect presentation method of a cash flow statement has been a long-standing issue in both practice and accounting research. By capitalizing on comparative advantages of experimental methods, we provide insights into how investors process the information contained in different presentation methods to make cash flow forecasts, especially in the context of various types of nonrecurring items. We predict and find that, when nonrecurring accrued expenses are present, the indirect method leads to lower forecast errors by activating investors’ underlying knowledge structures of operating cash flows in terms of an accrual (versus cash) basis. We also find that, in the presence of nonrecurring cash or nonrecurring accrued revenues, there is no difference in forecast errors between the indirect and direct methods. Moreover, we find that the combination of the direct and indirect methods (the direct-plus-indirect method) leads to lower forecast errors than the direct method, but it does not provide an incremental benefit for forecast accuracy beyond the indirect method. This paper was accepted by Brian Bushee, accounting. Funding: The authors acknowledge financial support from Chulalongkorn Business School, Korea University Business School, and the United Overseas Bank Endowment Fund. Supplemental Material: The e-companion and data are available at https://doi.org/10.1287/mnsc.2022.4406 .

Corporate Governance In Cash Management, Net Working Capital, And Cash Holding

Abstract: Manufacturing companies need effective cash management to meet their capital expenditures and cash holding. Effective cash management needs to be supported by good governance so that it can determine adequate cash holding. Independent variables in this study were measured by cash flow, cash conversion cycle, capital expenditure, net working capital, and board of commissioners' activities. Governance measured by the board of commissioners' activities is also a moderation variable. The data in this study were processed and analyzed using Eviews 10 for the period 2017 to 2020. The panel's data regression results show that the cash conversion cycle and net working capital have a negative influence on cash holding. Cash flow, capital expenditure, and board of commissioners' activities have no effect. The moderation regression test results show that the board of commissioners' activities could not moderate the influence of cash flow, cash conversion cycle, capital expenditure, and net working capital on cash holding.

Optimal Cash Holdings

Abstract: Abstract This chapter presents trends for corporate cash holdings and lists the pros and cons of such holdings. The costs of insufficient cash, referred to as “ripple effects,” are discussed in detail. They arise because the firm is unable to invest in value-enhancing projects, must raise expensive external capital, or is forced to sell assets. Firms with the greatest potential to experience ripple effects include those with good investment opportunities, long-lasting products, unique assets, opaque operations, and high correlation with peers. Those firms should project future cash distributions, because it is cheaper and easier to remedy a predicted cash shortage before it occurs.

Cash flow management and its effect on firm performance: Empirical evidence on non-financial firms of China

Abstract: The main purpose of this research is to investigate the impact of changes in cash flow measures and metrics on firm financial performance. The study uses generalized estimating equations (GEEs) methodology to analyze longitudinal data for sample of 20288 listed Chinese non-financial firms from the period 2018:q2-2020:q1. The main advantage of GEEs method over other estimation techniques is its ability to robustly estimate the variances of regression coefficients for data samples that display high correlation between repeated measurements. The findings of study show that the decline in cash flow measures and metrics bring significant positive improvements in the financial performance of firms. The empirical evidence suggests that performance improvement levers (i.e. cash flow measures and metrics) are more pronounced in low leverage firms, suggesting that changes in cash flow measures and metrics bring more positive changes in low leverage firms’ financial performance relatively to high leveraged firms. The results hold after mitigating endogeneity based on dynamic panel system generalized method of moments (GMM) and sensitivity analysis considering the robustness of main findings. The paper makes significant contribution to the literature related to cash flow management and working capital management. Since, this paper is among few to empirically study, how cash flow measures and metrics are related to firm performance from dynamic stand point especially from the context of Chinese non-financial firms.

Free Cash Flow Models

Abstract: Cash flow models include not only the dividend discount model but also free cash flow models, in which free cash flows are discounted at the expected rate of return instead of dividends. Free cash flows are the operating cash flows generated by the company less the net capital expenditures that are required for its operating activities. They can be determined either after payment of the debt provider claims (free cash flows to equity) or before these claims are paid (free cash flows to firm). The advantage of these valuation models is that they are conceptually sound and suitable for most equity valuation applications. The free cash flow to equity model and the free cash flow to firm model are presented in this chapter. The adjusted present value model, which is a further development of the free cash flow to firm model, is also described.

Scientific and theoretical basis of determining the free cash flow of enterprises

Abstract: This article describes the scientific and theoretical basis of determining the free cash flow of enterprises. In this, the theories of foreign and domestic economists regarding the calculation of free cash flow were analyzed and the opinions of scientific schools were studied. In determining the free cash flow of joint-stock companies, the practice of using free cash flows taking into account the company's EBIT, in particular, the indicator of income before paying interest and taxes, operating income after tax, is explained. Based on the results of the research, the procedure for calculating the free cash flow of the enterprise was developed.

Demand for Cash and its Determinants - a Post-Crisis Approach1

Abstract: Abstract The use of cashless payment instruments has been on an increase over many years now. At the same time, demand for cash has been on the rise as well and we can observe a particularly high level of growth demand for banknotes during crisis times. The increase in demand for cash known as the “banknote paradox” is a phenomenon observed in many economies. It results from the existence of two streams of demand for cash - transactional and precautionary, and the differences in the directions of their changes from the point of view of the central bank and other entities involved in cash transactions, since it enables the optimization of cash supply management, which allows, on the one hand, to reduce the costs of cash processing and, on the other hand, to improve the effectiveness of monetary policy. This paper estimates the share of the transaction demand for cash with the aggregate demand. The strength and direction of the impact of selected macroeconomic and behavioural factors (uncertainty caused by the Global Financial Crisis and the Pandemic Crisis) on transaction and precautionary demand for cash were also assessed. A novel approach to the problem of demand for cash is based on considering the impact of macroeconomic shocks in the form of crises on the demand for cash.

Detection of Cash Flow Shenanigans in The Financial Reports of PT Waskita Karya Tbk

Abstract: To better understand if fraud occurs in the financial reports generated by PT Waskita Karya Tbk in 2020–2022, the research problem is linked to the Cash Flow Shenanigans hypothesis. Positive and negative aspects of the contemporary, still-evolving age exist, such as an increase in dishonesty or fraud. Intentional deception has the dual goals of deceiving others and enhancing one's personal benefit. Financial statements that are false, especially those that mention cash flow, are one of the most typical forms of fraud. The information reviewed in this article suggests that PT Waskita Karya Tbk may be using the company's cash flow to conduct fraud or perpetrate it again. Using the company's cash flow ratio and keywords from the available references, this research approach combines qualitative and quantitative analysis. According to reports, the company transferred monies intended for financing activities to operational funds in the first cash flow scam. Reviewing the study's findings revealed that the company had stolen money. The fourth Cash Flow Shenanigan is an increase in operational cash flow caused by unsustainable operations. Finding out if PT Waskita Karya Tbk has ever engaged in fraud is vital since fraud may hurt all parties, especially investors.

Working Capital Management Function of Cash Flow Based Corporate Finance (CFCF) Model

Abstract: Purpose: The purpose of this article is to explain one of the six functions of “Cash Flow Based Corporation (CFCF) Model. Look at. Yilmaz(2022) and Yilmaz (2023). Methodology: 14 cash flow ratios were selected from the 30 ratios CFCF Model covers for explaining this subject . They are Cash Flow Adequacy I, Cash Flow Adequacy II, CFFO to Annual Interest Payments, Overall Cash Flow, Interest Payment Coverage, Fixed Charges Coverage, Cash Interest Coverage, CFFO to Assets, Current Maturities of LTD Coverage, Operating Cash Flow, Cash Current Debt Coverage, Return of Sales to CFFO, Operating Index, and Return of Sales to Cash.Then, they were explained by this writer to explain the subject. At the Chapter 4, an application on the Apple Financial Statements (Balance Sheets, Income Statements, and Cash Flow Statements) covering the years 2017-2022 was fulfilled.. Findings: Working capital management function of CFCF model could be fulfilled by using selected 14 cash flow ratios for this purpose and it could be applied in corporations like I applied in the Apple.

Cash Flow Management

Abstract: Cash flow is critical to any business, but from a project organization's point of view, effective cash flow management can mean the difference between project success and failure. This chapter focuses on why managing cash flow is vital to project success. It focuses on the various aspects of cash flow management, including payment arrangements and plans that influence cash flow, and will gain an appreciation of its importance in the context of managing cost and enhancing value in projects. In the case of longer-term projects, the time at which profits start accruing can have a bearing on the worth of future earnings. This is expressed by an important financial concept called the time value of money. A cost-reimbursable arrangement is often the simplest form of contract, particularly if the work is ill defined at the outset.

Analysis of the organization’s cash flows

Abstract: This article is devoted to the evaluation of the organization’s cash flow management based on cash flow analysis. The existing system of organization of cash flows of the enterprise is considered, the reasons for changes in inflows and outflows of funds are revealed, various approaches are given to assess the effectiveness of cash flows.

Discounted cash flow valuation and indirect cash flow analyses: retracing the cash

Abstract: The discounted cash flow method determines the value of a company by the cash flows the company will be able to generate for its capital providers. Here two capital providers are relevant: Providers of equity and providers of interest bearing debt. There are three basic items that need to be addressed when performing a discounted valuation: (i) cash flow: Which cash flow and how is this calculated? (ii) Discount rate, also referred to as the WACC: Which discount rate needs to be applied and how is this determined? (iii) Continuing value: How is the continuing value calculated? Performing a DCF (free cash flow to firm) results in the Enterprise Value of a company first. In order to arrive at the price that will be paid for a company as part of an M&A transaction, one needs to determine the Equity Value. Net Debt needs to be subtracted from the Enterprise Value to arrive at the Equity Value.

Do bank managers signal through cash flow statements?

Abstract: We empirically examine the cash flow statements for Japanese banks and whether their managers engage in classification shifting to temper concerns about risk exposure. To create a buffer against liquidity shocks, they shift cash flows from investing and/or financing activities to operating activities. We also find robust evidence that classification shifting intensifies in higher risk situations. Although prior research on managerial discretion focuses on earning management, we are the first to show cash flow management to avoid sequential negative changes in operating cash flows. We show that these activities convey valuable information about changes in banks' risk exposure.

Effect of Investments on Cash flow of Manufacturing Firms Listed at the Nairobi Securities Exchange

Abstract: The researcher in this study sought to establish the factors that affect cash flow in manufacturing firms in Kenya. The study was guided by the following specific objectives,to establish how investments affect cash flow in manufacturing firms listed in the Nairobi stock exchange, to find out how inventory controls affect cash flow in manufacturing firms listed in the Nairobi stock exchange, to determine how profitability affect cash flow in manufacturing firms listed in the Nairobi stock exchange. The researcher used descriptive research design to describe the factors affecting cash flow in manufacturing firms listed in the Nairobi stock exchange. A firm should be able to generate enough cash flows from its operations. If a firm is not able to cover its current liabilities with cash generated from operations, it will have cash challenges in financing its operations. A cash flow ratio of oneshow that the firm has healthy cash flows and a ratio of less than one shows that the firm does not have enough cash flows to finance its operations. The study covered a period of five years from 2012 to 2017.The methodology for the study was descriptive research design. The study employed population census as the listed firms were very few for the researcher to employ sampling. The listed firms were nine. Analyzed data was presented using figures and tables. The study findings revealed that there is a positive relationship between cash flows and investments as measured by net capital expenditure, profitability as measured by return on assets. There is a negative relationship between cash flows and inventory control as measured by inventory turnover. The study also established that there is a positive relationship between cash flows and profitability of a firm as measured by return on Assets (ROA).cash flows in all the firms have the same trend expect for Eveready East African ltd. The study concluded that manufacturing firms should exercise inventory control, invest wisely and also manage profitability of assets to ensure that the firm has enough cash flows to fund its operations

The Influence of Cash Ownership on Financial Performance: An Examination of Disruptors and Acquirers

Abstract: Cash ownership emits a powerful positive signal. We examine four sources of cash in firms, i.e., cash flows, cash holdings, cash proceeds from debt, and cash proceeds from equity. We examine the effects of cash ownership for firms growing by disruption, and firms growing by acquisition. Information signaling theory maintains that free cash flows may be used to increase shareholder wealth. Two-stage least squares regressions determined the impact of cash funding on disruptors and size of acquisition in the first stage, and cash-funded disruption or cash-funded acquisition in the second stage, for a US sample of 832 disruptor firms and 924 acquirers, from 2000–2020. Disruptions funded by cash holdings, cash flow, and cash proceeds from debt, significantly increased stock returns. A size effect was observed, with small disruptors showing significant effects. Acquisitions funded by cash holdings, cash flow, and cash proceeds from debt, significantly increased stock returns and return on assets. Agency costs significantly reduced returns and profits. Results for disruptions and acquisitions support signaling theory with free cash flows signaling higher share prices for both disruptors and acquirers, and higher profits for acquirers.

A Comparative Study on Cash Flow Statements of Dabur India Ltd. and Godrej Consumer Products Ltd. of India

Abstract: It is said that “Cash is king”. Cash flow analysis is the most important elements for the company. It helps to understand how much cash a business generated or used during a specific accounting period. The common statement of cash flow makes a bridge between the income statement and balance sheet by showing how cash moved in and out of the business. The Fast-moving consumer goods industry is growing tremendously. It is the fourth largest sector of nation. It is divided into main three sectors: household and personal care, healthcare and food and beverages. According to recent data Indian FMCG market has reached US dollar 56.8 billion in December 2022. In this research paper the two Indian giant FMCG company i.e., Dabur Indian Limited and Godrej consumer limited has been considered. The analysis of cash flow statement is carried out for five years. It helps to know how company manages its cash inflow and outflow.

Peranan Audit Operasional dalam Pemeriksaan Sumber dan Penggunaan Dana pada PT. BPR Eka Prasetya Medan

Abstract: xThe purpose of this study was to determine the role of operational audit in examining sources and uses of funds at BPR Eka Prasetya Medan. The formulation of the problem in this study is "What is the role of the operational audit in examining the sources and use of funds at BPR Eka Prasetya"?. Auditing is "An examination that is carried out critically and systematically by an independent party, on the financial statements that have been prepared by management along with the accounting records and supporting evidence, with the aim of being able to provide an opinion regarding the fairness of the financial statements". BPR Eka Prasetya Medan, prepares a cash flow statement using the indirect method, in which this method reports cash flows prepared based on cash/bank. The method of preparing the statement of cash flows is indirectly prepared based on the income statement and balance sheet. changes in cash inflows (inflows) and cash outflows (outflows) as presented in cash flows in operating activities are as follows, in 2011 the value of Rp. 894,055,200, - while in 2012 it was Rp. 610,441,800,-. Changes in operating cash flow can be seen from 2011 to 2012 of (Rp. 283,610,400) the company's operating cash flow experienced a decrease or was negative. After doing a comparison between theory and practice regarding the role of operational audit in the source and use of funds on cash flow as a tool in increasing the effectiveness and efficiency of the company. This can also be seen from the procedures carried out by BPR Eka Prasetya in avoiding misappropriation of incoming and outgoing cash.

The Impact of Economic Uncertainty on the Cash Flow of Listed Real Estate Companies in China

Abstract: After the policies of "no speculation in housing" and "three red lines" have been introduced one after another, more real estate enterprises have heard the news of "thunder explosion" one after another. Based on this, it is particularly important to explore how real estate companies can develop under the influence of increasing economic policy uncertainty. Among them, cash flow is very important for real estate enterprises. Based on this, this paper uses TVP-VAR model to simulate the impact of economic policy uncertainty on the cash flow of listed real estate companies in the important regulatory period and time point of national policies. It is found that the cash flow of operating activities is most affected by economic policy uncertainty, while the cash flow of financing activities is relatively less affected by economic policy uncertainty. Cash flow from short-term operating activities is more sensitive to impact performance, and cash flow from investment activities is more intense in the long run; At the same time, it explains the conclusion that the government is making efforts to end the "barbaric era" of capital power. Based on the conclusion, this paper puts forward some enlightenment, such as strengthening cost management and strategic adjustment, and for high-risk real estate enterprises, we can consider looking for positioning transformation.

The role of treasury diagnosis on the assessment of the company's financial performance: Practical case study

Abstract: Cash management has become a necessary and essential management tool for managing the company. Hence effective cash management will guarantee the liquidity, solvency and profitability of the company, thus ensuring its financial performance. This article reports a theoretical conceptual framework that illustrates the relationship between cash management and business performance, and how to perform an accurate cash diagnosis to monitor and evaluate the financial performance of the business, at through reports and financial statements (an example on the press company "LE QUOTIDIEN SA"). We arrived at several results, among them: The diagnosis of the cash flow is essential to evaluate the financial performance of a company. Thanks to the study of significant relationships between quantities extracted from financial statements, the ratio method provides a simple approach for assessing the performance of a company. This assessment is generally made on the basis of a comparison between the ratios calculated on the company and reference ratios reflecting significant standards, internal or external. Among the factors which determine the level of performance, mention should be made of the structure of the company's financing. Although the role of this structure is complex, the analysis of the leverage effect provides a first approach, already rich in implications for the assessment of financial performance