Showing papers on "Cash flow statement published in 1993"
Book•
01 Aug 1993
TL;DR: In this paper, the authors present a framework for financial statement analysis based on the concept of accumulated income and assets, which is used in the analysis of Long-Lived Assets.
Abstract: 1. Framework for Financial Statement Analysis.2. Accounting Income and Assets: The Accrual Concept.3. Analysis of Cash Flows.4. Foundations of Ratio and Financial Analysis.5. Empirical Research: Implications for Financial Statement Analysis.6. Analysis of Inventories.7. Analysis of Long-Lived Assets: Part I-The Capitalization Decision.8. Analysis of Long-Lived Assets: Part II-Analysis of Depreciation and Impairment.9. Analysis of Income Taxes.10. Analysis of Financing Liabilities.11. Leases and Off-Balance-Sheet Debt.12. Pensions and Other Employee Benefits.13. Analysis of Intercorporate Investments.14. Analysis of Business Combinations.15. Analysis of Multinational Operations.16. Derivatives and Hedging Activities.17. Analysis of Financial Statements: A Synthesis.18. Accounting- and Finance-Based Measures of Risk.19. Valuation and Forecasting.Present Value Tables.Bibliography.Index.
497 citations
TL;DR: In this paper, a simple analysis of variance method is used to decompose restructuring transactions and outcomes into the three effects of free cash flow, corporate governance, and takeover threat in determining financial and portfolio restructuring.
Abstract: This study seeks to estimate the relative importance of free cash flow, corporate governance, and takeover threat in determining financial and portfolio restructuring. The free cash flow hypothesis and agency theory prescriptions are used as the basis for developing a model of restructuring. A simple analysis of variance method is used to decompose restructuring transactions and outcomes into the three effects. The results support the hypothesis that financial and portfolio restructuring are motivated, in part, by agency costs. Decomposition of variances indicates that restructuring is equally explained by free cash flow and interaction of governance and takeover threat with free cash flow.
227 citations
TL;DR: In this paper, the authors explore a possible source of such bias in the structure of the uncertainty underlying project cash flows, and the way it is incorporated into project discounting, and propose a solution to the problem.
Abstract: Discounted cash flow analysis is the most common method for evaluation of investment projects, yet practitioners worry about its shortcomings. In particular, there is concern that standard DCF comparisons may introduce bias against long-term investments. Here, we explore a possible source of such bias in the structure of the uncertainty underlying project cash flows, and the way it is incorporated into project discounting.
118 citations
TL;DR: In this article, the authors show that the results of variance-bound tests depend on how cash distributions to shareholders are measured, and they find apparent evidence of excess volatility when a narrow definition of cash flow (dividends only) is applied.
Abstract: This paper shows that the results of variance-bound tests depend on how cash distributions to shareholders are measured. As in prior studies, we find apparent evidence of excess volatility when a narrow definition of cash flow (dividends only) is applied. However, we are unable to reject the hypothesis of market efficiency when the cash flow measure also includes share repurchases and takeover distributions in addition to ordinary cash dividends. ACADEMICS AND PRACTITIONERS HAVE long debated whether the volatility in
93 citations
Journal Article•
TL;DR: In this article, the authors proposed a set of cash flow-based ratios that can be used for relative performance evaluation, which can be viewed in terms of sufficiency and efficiency.
Abstract: Cash-flow-based ratios are useful in evaluating a company's financial strength and profitability. One product of accounting evolution in the United States is the use of ratios for analyzing financial statements. Originally developed as short-term credit analysis devices, ratios can be traced as far back as the late 19th century. Since then, analysts have developed many financial ratios that are widely used by practitioners and academicians. A relatively recent development has been the Financial Accounting Standards Board requirement to prepare a statement of cash flows. To date, little has been done to suggest a comprehensive set of cash flow ratios with the potential to evaluate financial performance. Scattered empirical evidence in published studies does not identify a complete set of useful ratios. Relative performance evaluation is one important use of cash flow ratios, which can be viewed in terms of sufficiency and efficiency. Sufficiency describes the adequacy of cash flows for meeting a company's needs; efficiency describes how well a company generates cash flows relative both to other years and to other companies. This article proposes some cash-flow-based ratios that can be used for relative performance evaluation. We conducted an empirical study of cash flow statements to provide some industry averages and to determine if the potential exists to develop benchmarks for the ratios by industry. These benchmarks can play an important part in evaluating the relative sufficiency and efficiency of a company's cash flows. USE OF RATIOS Analysts use ratios to predict financial variables and to evaluate relative performance. They group ratios into liquidity and profitability categories to predict bankruptcy, the probability of loan defaults and stock prices. Relative performance evaluation assumes comparing a company's performance to that of a chosen industry or benchmark ratio filters out the performance effects of common uncertainties, leaving only company-specific performance. In such evaluations, other companies' performance provides information about a specific company's performance. Although recent studies yielded apparently contradictory results, most cash flow studies show the value of cash flow data. This is especially true in predicting bankruptcy and financial distress. Little has been done with respect to using cash flow ratios for relative performance evaluation. CASH FLOW RATIOS Our study provides a starting point for developing some benchmarks (norms or standards) for cash flow ratios. The cash flows from the operating activities classification on the statement of cash flows generally summarize the cash effects of transactions and other events involved in determining net income. Operating activities involve an enterprise's primary activities - the production and delivery of goods and services. They are the enterprise's primary focus and the primary variable of interest in this study. Cash from operations is a component of each of the ratios shown in exhibit 1, page 57, which have been classified as sufficiency or efficiency to describe their potential use in relative performance evaluation. Sufficiency ratios. The cash flow adequacy ratio directly measures a company's ability to generate cash sufficient to pay its debts, reinvest in its operations and make distributions (dividends) to owners. A value of 1 over a period of several years shows satisfactory ability to cover these primary cash requirements. The long-term debt payment, dividend payout and reinvestment ratios provide further insight for investors and creditors into the individual importance of these three components. When expressed as percentages and added together, these three ratios show the percentage of cash from operations available for discretionary uses. Although a company could use cash generated from financing and investing activities to retire debt, cash from operations represents the main source of long-term funds. …
69 citations
Posted Content•
TL;DR: In this paper, the authors examined the cash conversion cycle as an indicator of the company's liquidity, and investigated the implications of the Cash conversion cycle for small businesses in terms of profitability and firm size.
Abstract: The purpose of this study is to examine the cash conversion cycle as an indicator of the company’s liquidity, to determine the relationship of the cash conversion cycle with the current and the quick ratios and with its component variables, and to investigate the implications of the cash conversion cycle for small businesses in terms of profitability and firm size.
50 citations
Book•
01 Aug 1993
TL;DR: The Accounting Information System Accounting and Organizations Information in Organizations Accounting Measurement Processing Accounting Information Reporting Accounting Information reporting Accruals and Cash Flows The Accounting Profession Section Section IIuAnalysis and Interpretation of Financial Accounting Information Financing Activities: Equity Financing activities: Debt Analysis of Financing Activity Investing Activities Analysis of Investing activities Operating Activities Analysisof Operating Activities Nonbusiness Organizations Appendices: A - Sources of Information About Companies and Industries B - General Mills, Inc. 10-K Report C - General Milling, Inc., Inc. as mentioned in this paper, Inc. Proxy Statement
Abstract: Section 1uThe Accounting Information System Accounting and Organizations Information in Organizations Accounting Measurement Processing Accounting Information Reporting Accounting Information Reporting Accruals and Cash Flows The Accounting ProfessionSection Section IIuAnalysis and Interpretation of Financial Accounting Information Financing Activities: Equity Financing Activities: Debt Analysis of Financing Activities Investing Activities Analysis of Investing Activities Operating Activities Analysis of Operating Activities Nonbusiness Organizations Appendices: A - Sources of Information About Companies and Industries B - General Mills, Inc. Financial Report C - General Mills, Inc. 10-K Report D - General Mills, Inc. Proxy Statement E - Compaq Computer Corp. Statement of Cash Flows.
27 citations
TL;DR: In this paper, the main components of working capital decisions are integrated within a discounted cash flow framework in order to study the interrelationships among inventory, procurement, cash discounts, accounts payable and account receivable policies.
Abstract: This paper considers the problem of integrating the main components of working capital decisions within a discounted cash flow framework in order to study the interrelationships among inventory, procurement, cash discounts, accounts payable and account receivable policies. The model yields a set of policies which are not only simple to implement but have intuitively appealing economic significance.
27 citations
TL;DR: The use of the statement of cash flow is a relatively new wrinkle in financial reporting as mentioned in this paper, however, it can be a useful management tool and can be used as a tax statement.
Abstract: The use of the statement of cash flow is a relatively new wrinkle in financial reporting. This statement, however, can be a useful management tool
26 citations
TL;DR: This article examined the relationship between management compensation, earnings and cash flows and explored the role of cash flow and working capital from operations in addition to total reported earnings in determining managerial compensation, concluding that a performance evaluation scheme based on multiple signals is superior to one that is based on a single signal, provided the additional signals incorporate new information.
Abstract: This study examines the relationship between management compensation, earnings and cash flows. The preponderance of prior research reveals a substantial correlation between total earnings and compensation. However, the popular press indicates that many firms have switched to less traditional methods of awarding executive compensation. For example, Chrysler Corporation now bases substantial compensation on quality control in manufacturing while First Chicago bases compensation on the minimizing of loan losses. Because of their relatively high debt levels in the late 1980s, some firms are stressing cash flows in designing compensation plans. For example, the New York Times [2/25/90, p.29 in Section 3] reports that RJR Nabisco Inc. uses cash flows to compute the bonus pool while The Wall Street Journal [4/18/90, p. R26] indicates that board of directors often dump income‐based fixed compensation formulas in favor of performance goals such as cash flows. From a normative viewpoint, Holmstrom's [1979] analysis suggests that a performance evaluation scheme based on multiple signals is superior to one that is based on a single signal, provided the additional signals incorporate new information. Given these anecdotal reports indicating cash‐flow based compensation and the implications of existing theory, we explore the role of cash flows and working capital from operations in addition to total reported earnings in determining managerial compensation.
26 citations
TL;DR: In this paper, the authors study the dynamic investment policies of firms under asymtnetric information and show that managers make decisions to maximize the wealth of e.g. shareholders.
Abstract: This paper studies the dynamic investment policies of firms under asymtnetric information. Managers make decisions to maximize the wealth of e.yisiini^ shareholders. In equilibrium, the superior firms invest "myopically." choosing intrinsically lower-valued projects that produce "early" cash fiows. The inferior firms follow the socially preferred rule of investing in intrinsically higher-valued projects that produce "late" cash flows. In addition to explaining investment myopia, the model generates numerous predictions regarding announcement effects of equity issues and attempts by firms to stockpile cash, firms' preferences for limits on mandatory di.sclosure rules, and the etfects of managerial entrenchment motives.
Book•
31 Aug 1993
TL;DR: The chapter discusses the recording process, standards of Ethical Conduct for Management Accountants, and current Liabilities and Payroll Accounting in relation to Corporations.
Abstract: Chapter 1. Accounting in Action.Chapter 2. The Recording Process.Chapter 3. Adjusting the Accounts.Chapter 4. Completion of the Accounting Cycle.Chapter 5. Accounting for Merchandising Operations.Chapter 6. Inventories.Chapter 7. Accounting Information Systems.Chapter 8. Internal Control and Cash.Chapter 9. Accounting for Receivables.Chapter 10. Plant Assets, Natural Resources, and Intangible Assets.Chapter 11. Current Liabilities and Payroll Accounting.Chapter 12. Accounting Principles.Chapter 13. Accounting for Partnerships.Chapter 14. Corporations: Organization and Capital Stock Transactions.Chapter 15. Corporations: Dividends, Retained Earnings, and Income Reporting.Chapter 16. Long-Term Liabilities.Chapter 17. Investments.Chapter 18. The Statement of Cash Flows.Chapter 19. Financial Statement Analysis.Appendix A. Specimen Financial Statements: PepsiCo.Appendix B. Specimen Financial Statements: The Coca-Cola Company.Appendix C. Present Value Concepts.Appendix D. Standard of Ethical Conduct for Management Accountants.Phot Credits.Company Index.Subject Index.
TL;DR: In this paper, the authors investigated the informational characteristics of accrual earnings, cash flow-based earnings and cash dividend releases in the Finnish stock market and investigated the incremental information of these announcements.
TL;DR: In this article, a composite model consisting of internal cash flow variables, neoclassical variables, and accelerator variables is developed to explain agricultural investment using firm-level data, and the authors show that the addition of internal Cash Flow variables can increase the explanatory power of agricultural investment models.
Abstract: Recent asymmetric information studies have used internal cash flow variables in empirical investment models. A composite model consisting of internal cash flow variables, neoclassical variables, and accelerator variables is developed to explain agricultural investment. Using firm-level data, we show that the addition of internal cash flow variables can increase the explanatory power of agricultural investment models.
TL;DR: In this article, the authors examined the impact of the agency costs of free cash flow and the reduction of these costs through reputation building, in particular, management's reputation, and found that shareholders react more favorably to equity issue announcements if firms have acquired only assets related to their core business than to other equity issue announcement.
Abstract: Recent studies document negative reactions by shareholders to the announcement that a firm intends to issue common equity.' Several theories have been offered to explain shareholder response to equity issues. In addition to traditional capital structure explanations such as tax effects and bankruptcy costs, recent theories suggest shareholders may be responding to negative signals (Myers and Majluf 1984), high transaction costs for issuing equity (Masulis 1988), and increased agency costs (Jensen 1986a). It is likely that all of these theories explain, in part, shareholder reactions to equity issues. The purpose of this study is to examine the impact of the agency costs of free cash flow and the reduction of these costs through reputation building, in particular, management's reputation Jensen argues that there are agency costs associated with free cash flow. This study extends that argument and posits that shareholders condition their valuation decisions on firms' reputations regarding free cash flow abuse. We test this notion by examining share price responses to equity offers, which generally exacerbate the cash flow problem, for firms differentiated by their recent acquisitive behavior. The results suggest that shareholders react more favorably to equity issue announcements if firms have acquired only assets related to their core business than to other equity issue announcements. * We thank an anonymous referee, Scott Harrington, Tim Koch, Ken Lehn, Ted Moore, Greg Niehaus, Rod Roenfeldt, Jack Trifts, and seminar participants at the University of South Carolina and at the University of North Carolina at Chapel Hill for many helpful comments. Tom Secrest provided outstanding research assistance. In addition, support was provided by the University of South Carolina Research Fellowship Program. 1. For example, Mikkelson and Partch (1985), Pettway and Radcliffe (1985), Asquith and Mullins (1986), Masulis and Korwar (1986), and Kalay and Shimrat (1987) find significantly negative prediction errors around the announcement of common equity issues.
Book•
24 Sep 1993
TL;DR: In this article, the authors present a detailed overview of corporate financial reporting systems for retail and manufacturing companies, including basic accounting systems, dual entry accounting systems and dual entry systems for manufacturing companies.
Abstract: Overview of Corporate Financial Reporting. Basic Accounting Systems: Retail Companies. Dual Entry Accounting Systems: Manufacturing Companies. Revenue Recognition. Cash Flow Statement. Statement Format and Consolidated Statements. Financial Statement Analysis. Cash, Accounts Receivable, and Marketable Securities. Inventory. Noncurrent Assets. Liabilities. Long-Term Liabilities. Owners' Equity. Appendices.
Book•
01 Jan 1993
TL;DR: In this paper, the authors discuss the use of accounting information and the financial statements for analyzing business transactions and concluding the accounting cycle, and present the future value and present value tables.
Abstract: 1. Uses of Accounting Information and the Financial Statements 2. Analyzing Business Transactions 3. Measuring Business Income 4. Completing the Accounting Cycle 5. Financial Reporting and Analysis Supplement to Chapter 5: How to Read an Annual Report 6. The Operating Cycle and Merchandising Operations 7. Inventories 8. Cash and Receivables 9. Current Liabilities and the Time Value of Money 10. Internal Control 11. Long-Term Assets 12. Contributed Capital 13. Long-Term Liabilities 14. The Corporate Income Statement and the Statement of Stockholder's Equity 15. The Statement of Cash Flows 16. Investments 17. Financial Performance Measurement Appendix A. Future Value and Present Value Tables Appendix B. Partnerships
Book•
24 Oct 1993
TL;DR: In this article, the authors present an overview of accounting and financial reporting, and present a framework for measuring and reporting the performance of a company's financial statements, as well as some accounting concepts.
Abstract: PART I. AN OVERVIEW OF ACCOUNTING AND FINANCIAL REPORTING. The Accounting Framework, Financial Statements, and Some Accounting Concepts. Case: Chemalite, Inc. Introduction to Accounting Records. Case: Hanson Ski Products. Case: Thumbs Up Video, Inc. Case: Monterrey Manufacturing Company. Introduction to Financial Ratios and Financial Statements. Case: Indentify the Industries - 1996. Case: Colgate-Palmolive Company. HOW ACCOUNTANTS MEASURE AND REPORT. Accounting for Current Assets. Case: LIFO or FIFO? That is the Question. Recognizing Revenues and Expenses: When is Income Earned? Case: R. J. Reynolds Tobacco Company. Case: Circuit City Stores, Inc. (A). Case: Intel Pentium Chip Controversy (A). Accounting for Property, Plant, Equipment and Other Assets. Case: Depreciation at Delta Air Lines and Singapore Airlines (A). Case: Depreciation at Delta Air Lines and Singapore Airlines (B). Case: Kansas City Zephyrs Baseball Club, Inc. Case: Buying TimeLiabilities and Time. Case: Laurinburg Precision Engineering. Case: Belgrave Corporation. Case: Accounting for Frequent Flyers. Introduction to Owner's Equity. Case: FMC CorporationSolving the Puzzle of the Cash Flow Statement. Case: Statement of Cash Flows: Three Examples. Case: Crystal Meadows of Tahoe, Inc. MANAGING FINANCIAL REPORTING. Auditors and Their Opinions. Case: Total Fitness, Inc. (A) Esperanto for Accountants. Case: WPP Group and Its Acquisitions. Diversity in Accounting Principles. Case: Kendall Square Research Corporation (A). Case: Harnischfeger Corporation. COST CONCEPTS AND ANALYSIS. Understanding Costs for Management Decisions. Case: Precision Worldwide, Inc. Case: Lille Tissages, SA. Case: Prestige Telephone Company. A Brief Introduction to Cost AccountingCase: Hilton Manufacturing Company. PRODUCT COSTING AND AN INTRODUCTION TO COST MANAGEMENT. Accounting for Indirect Costs. Case: Seligram, Inc.: Electronic Testing Operations. Activity Accounting: Another Way to Measure Costs. Case: Destin Brass Products Co. Case: Siemens Electric Motor Works (A). Case: Kanthal (A). Standard Costs and Variance Analysis. Case: Waltham Motors Division. Case: Mile High Cycles. Case: Polysar Limited. PART SIX: ANALYSIS FOR CAPITAL INVESTMENT DECISIONS. Basic Capital Investment Analysis. Case: Riverbend Telephone Company. Case: Reto S.A. Case: The Super Project. PART SEVEN: MEASUREMENTS FOR MANAGEMENT CONTROL. Control in an Age of Empowerment. Case: Indianapolis: Implementing Competition in City Services. Case: Nordstrom: Dissension in the Ranks? (A). Case: Codman & Shurtleff, Inc.: Planning and Control System. Responsibility Centers and Performance Measurement. Case: Western Chemical CorporationThe Balanced Scorecard - Measures that Drive Performance. Case: Chadwick, Inc. REVIEW CASES. Consulting Partners & Co. King's Mountain Distillery, Inc.
Book•
01 Jan 1993
TL;DR: In this article, changes in common stockholder wealth when companies announce purchases and sales of real estate assets may result from changing investor perceptions about the risk, timing and/or amount of future c...
Abstract: Changes in common stockholder wealth when companies announce purchases and sales of real estate assets may result from changing investor perceptions about the risk, timing and/or amount of future c...
TL;DR: In this article, the authors point out that because of accountants' use of the accrual system, rather than cash, and the meticulous detail that tends to make statements too complicated for the untrained user, many operators simply do not attempt to use these statements.
Abstract: Evidence in the literature repeatedly points towards failure to understand cash flow shortages as a major problem of small business operators. Theoretically, they should be able to use financial statements prepared by their accountants as planning and control tools. However, because of accountants' use of the accrual system, rather than cash, and the meticulous detail that tends to make statements too complicated for the untrained user, many operators simply do not attempt to use these statements.
Book•
01 Apr 1993
TL;DR: In this article, the authors present a taxonomy of the accounting environment, including the basis of financial statements, the Double Entry System, the basic double-entry system, and the basic framework of the books.
Abstract: 1 The Accounting Environment 2 The Basis of Financial Statements 3 The Basic Double-Entry System 4 Stock and Credit 5 The Basic Framework of the Books 6 End of Period Adjustments 7 Sundry Bookkeeping Procedures 8 The Accounts of a Manufacturer 9 Incomplete Records 10 Limited Companies: Capital and Reserves 11 Cash Flow Statements 12 Limited Companies: Accounting Regulations 13 Performance Assessment 14 Partnerships: Introduction 15 Partnerships: Changes to Ownership 16 Organizations not Trading for Profit 17 Sectional Activity 18 Groups of Companies: An Introduction 19 Specialized Accounting Standards 20 A Return to Ethics Suggested Answers to Self-Assessment Questions Index
TL;DR: In this article, the authors explore the empirical puzzle currently existing regarding the observed positive stock price reaction associated with self-tender offer announcements and find no support for the free cash flow hypothesis.
Abstract: This study explores the empirical puzzle currently existing regarding the observed positive stock price reaction associated with self-tender offer announcements. The puzzle stems from Lang and Litzenberger's (1989) findings that Jensen's (1986, 1989) free cash flow (overinvestment) hypothesis is consistent with changes in cash dividends, whereas Howe, He and Kao's (1992) study of analogous cash events (i.e., self-tender offers and specially designated dividends) finds no support for the free cash flow hypothesis. By stratifying our sample of firms repurchasing their stock by the source of the firm's free cash flow (overinvestment) problem, additional light is shed on the interaction between the signalling and free cash flow theories.
TL;DR: In this paper, the authors reported that the simple linear regression model based on the smoothed cash flow beta did provide significant explanatory power of the variability in market beta for the South African market.
Abstract: Cash flow from operations can be considered an important indicator of the quality of income of a company. The value of cash flow data was emphasized by Ismail & Kim who found that cash-flow-based accounting betas have significant incremental explanatory power over earnings-based betas in explaining the variability in market risk. In this article similar research is reported which was conducted on a sample of companies extracted from the Industrial Section of the Johannesburg Stock Exchange and using the methodology proposed by Ismail & Kim. A three year moving average smoothing procedure was also applied to the accounting return variables in order to reduce the effect of short-term influences on the cash flow. Although it was not possible from the research to obtain similar statistically significant results for the South African market (partly because of the relatively small sample size), it was found that the simple linear regression model based on the smoothed cash flow beta did provide significant explanatory power of the variability in market beta.
Journal Article•
TL;DR: It is found that stock returns lead accounting returns rather than vice versa, and the thin Finnish stock market appears to produce important information about the future success of Finnish companies for decision making purposes.
Abstract: This paper investigates the dynamic linkages between stock market prices, accrual earnings and cash flows using Finnish data. We find that stock returns lead accounting returns rather than vice versa. Thus, the thin Finnish stock market appears to produce important information about the future success of Finnish companies for decision making purposes. In addition, the cointegration analysis performed here indicates that the inclusion of the so-called error correction term based on non-stationary price variables significantly improves the observed association between stock market and accounting variables. Thus, in future research, the long-term adjustment between stock market and accounting variables should be analysed more carefully when investigating the causality between accounting earnings and stock markets.
TL;DR: In this article, the authors examined 64 recent textbooks in finance, management, marketing, and accounting and found that insufficient emphasis on the statement of cash flows was placed on the financial statements.
Abstract: Recent research studies have shown that the statement of cash flows provides important information for business decisionmaking. Also, generally accepted accounting principles require preparation of the statement of cash flows as one of the three primary financial statements. Yet, in light of authoritative pronouncements and research evidence, examination of 64 recent textbooks in finance, management, marketing, and accounting reveals insufficient emphasis on the statement of cash flows. Suggestions for remedying the situation are provided.
Book•
01 Aug 1993
TL;DR: A step-by-step guide which will, within a few hours, have you understanding and using company accounts with confidence as mentioned in this paper, including balance sheets, profit & loss accounts and cash flow statements, key terms, how to monitor a company's financial performance, risk and how to value a company.
Abstract: "Everything is explained with extraordinary clarity, without the use of jargon or the kind of strangled prose loved by professionals Well worth the cover price"- Business North West"Even the most terrified reader can grasp the concepts"- Daily TelegraphA classic Even if you know it all already, there's no harm in going back to first principles It travels all the way from the fundamental principles of the balance sheet to a few "tricks of the trade" -- via analysis of funding structures and how to value companies It's all too easy to become bogged down in detail when you're running a company This book is a great way to keep yourself informed -- without being submergedA step-by-step guide which will, within a few hours, have you understanding and using company accounts with confidence Contents include: balance sheets, profit & loss accounts and cash flow statements, key terms, how to monitor a company's financial performance, risk, how to value a company and creative accounting techniques to watch out forAuthor:Anthony Rice is a consultant
TL;DR: In this article, the authors argue for an endogenous system of estimating relevant working capital cash flows on a periodic basis, arguing that the conventional approach to considering working capital Cash Flow in capital budgeting is to omit them or include some ad hoc figures at the initiation and termination of the project.
Abstract: The conventional approach to considering working capital cash flows in capital budgeting is to omit them or include some ad hoc figures at the initiation and termination of the project. The authors argue for an endogenous system of estimating relevant working capital cash flows on a periodic basis. Otherwise, the present value of working capital cash flows is biased against the project's acceptance. Examples of calculating working capital cash flows as related to changes in annual sales are presented for three time patterns of sales and contrasted to the conventional method. An empirical study of the linear relationship of net working capital and sales revenue of 770 companies is reported, and an alternative cash flow model is offered thai includes working capilal cash flows.
TL;DR: In this article, the authors investigate the hypothesis that managers are motivated to control accumulated free cash flows, as well as to control the recurring component from operations as suggested in Jensen's (1986, 1988) theory on agency behavior and control.
Abstract: This paper offers and investigates the hypothesis that managers are motivated to control accumulated free cash flows, as well as to control the recurring component from operations as suggested in Jensen's (1986, 1988) theory on agency behavior and control. Such managers may be willing to sacrifice a portion of the recurring component of free cash flow in the form of additional interest expense, as well as to incur the additional monitoring by capital markets, in exchange for control over a greater level of accumulated free cash flow in the form of cash and equivalents. Partial support for this hypothesis is observed for a sample of acquisition targets possessing poison pill defenses, which enhances the likelihood of the required agency behavior. Target firms are observed to have above-average levels of capital expenditures, cash and equivalents, and debt. When regressed on premiums offered to target shareholders, however, only the target debt level is found to be significant.