Understanding the connection between SMEs’ competitiveness and cash flow generation: an empirical analysis from Hungary

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Gabor Markus ◽  
Andras Rideg
Keyword(s):  
Financial Performance ◽  
Cash Flow ◽  
Explanatory Power ◽  
Cash Flows ◽  
Ordinary Least Squares ◽  
Competitive Performance ◽  
Content Type ◽  
The Past ◽  
Wide Range ◽  
The Future

Purpose The purpose of this paper is to interconnect the firm level competitive performance (competitiveness) to the financial performance of the firms. The goal is to give evidence on how successful small- and medium-sized enterprises (SMEs) use their financial performance to support their competitive performance. Design/methodology/approach Competitiveness is interpreted and measured through the resource-based view theory on a wide range of competitiveness measurements with a sample size of 639 SMEs. Financial data originate from official, publicly accessible governmental archives. All data are from a mid-size Central European country (Hungary). To interconnect competitiveness and financial performance, this paper recognizes two types of cash flow, namely, cash flow to the “past” (dividend and debt service) and cash flow to the “future” (CAPEX and innovation). This paper used ordinary least squares regression and binomial logistic regression to analyze connections. Findings Cash flows to the “future” have much stronger effects on competitiveness than cash flows to the “past.” Debt services do not affect competitiveness, whereas dividends, CAPEX and innovation efforts have a significant positive connection to competitiveness, showing that higher cash flow indicates higher competitive performance. If this paper knows how much the firm spends on innovation and dividends, in about the four-fifths of the cases, this paper can predict the level of the competitiveness of the firm without any additional information. The level of these variables gives enough information, the variability of them is not relevant. Research limitations/implications The explanatory power of future-oriented cash flow elements is much higher than that of the past-oriented ones, while innovation dominates all models. Firms with higher competitiveness build their returns in their cost structure, and only when the financial position of the firm is stable enough, withdraw the financial resource based on a long-term plan. The results are limited by the fact that using the current sample, detailed and representative (e.g. cross-industrial, spatial, etc.) decomposition is not possible. Originality/value Literature is focusing on how SMEs reach success, how SMEs “earn money.” There is no evidence on how SMEs “spend money,” earned during their success.

scholarly journals Simulation evidence on the properties of alternative measures of working capital accruals

2017 ◽  
Vol 25 (4) ◽  
pp. 378-394
Author(s):  
Javad Izadi Zadeh Darjezi ◽  
Homagni Choudhury ◽  
Alireza Nazarian
Keyword(s):  
Cash Flow ◽  
Estimation Error ◽  
Explanatory Power ◽  
Cash Flows ◽  
Working Capital ◽  
Accrual Quality ◽  
Content Type ◽  
Explanatory Variables ◽  
Study Results ◽  
The Uk

Purpose This paper aims to investigate the specification and power of tests based on the DD and modified DD model through the UK data between years 2000 and 2013, and make comparisons with tests using working capital accruals creating a measure of accruals quality as the standard deviation of the residuals value from firm-specific regressions base on working capital accruals on last, current and one-year-ahead cash flows from operations. Design/methodology/approach This study focuses both on the DD model and modified DD model to find out which of them can more accurately capture total working capital accrual estimation error and accrual quality. According to the DD model, the past, current and future net cash from operating activities as the three years’ operating cash inflows or outflows become omitted and correlated variables. In this study, the authors continue to document residuals from the DD and MDD models to demonstrate properties that are more consistent with behaviours of accruals estimation errors. Therefore, in this study, the authors are looking to compare the results from both the MDD and DD models and find which one of them is more effective in explaining the working capital accruals in the UK. Findings The authors find that adding additional explanatory variables may add additional explanatory power of variables to the DD model and extent to which accruals map into cash flow insights based on the UK data. This study is empirically well fitting with the internal workings of cash flows. As investors fixate only on the accounting earnings, they may fail to reflect fully on information contained within cash flow components and working capital accruals of current and future earnings. Originality/value The authors compare different equation to cover more items of working capital accruals. In addition, after examining earnings and accrual quality, the findings show that the average UK company behaviour was quite similar to the behaviour that was founded earlier for both models in the USA. Furthermore, this study results show that more volatility of sales, cash flow, accruals and earnings make a lower accrual quality. The results demonstrate that both models can capture the power to predict working capital accruals. Moreover, we find that adding additional explanatory variable of employee growth rate adds additional explanatory variables to DD model.

scholarly journals Principals of Financial Modelling

2011 ◽  
Vol 3 (2) ◽  
pp. 75-88 ◽  
Author(s):  
Sławomir Janiszewski
Keyword(s):  
Financial Performance ◽  
Cash Flow ◽  
Balance Sheet ◽  
Financial Statements ◽  
Financial Modelling ◽  
The Past ◽  
The Future ◽  
Cash Flow Statement

Principals of Financial ModellingThe financial statements submitted by each company annually reflect their financial performance in the past but are also utilized to forecast the future results in quantitative and realistic frames. The aim of the following elaboration is to thoroughly research all the issues related to financial modelling. The author step by step introduces the reader with theoretical and practical assumptions related to forecasting of respectively, the profit & loss account, balance sheet account and cash flow statement. All of the issues are illustrated with excel spreadsheets that were prepared exclusively for this article purposes.

scholarly journals Allocation of internally generated corporate cash flow in Africa

2018 ◽  
Vol 8 (4) ◽  
pp. 495-513 ◽  
Author(s):  
Henry Agyei-Boapeah ◽  
Michael Machokoto
Keyword(s):  
Cash Flow ◽  
Capital Markets ◽  
Capital Expenditure ◽  
Theory Development ◽  
Cash Flows ◽  
Ordinary Least Squares ◽  
Equity Capital ◽  
Content Type ◽  
Dividend Payments ◽  
The Right

Purpose The purpose of this paper is to examine how managers of African firms, operating in environments characterised by less developed capital markets and weak institutional structures, make use of their internally generated cash flows. Design/methodology/approach The authors use a panel data methodology which regresses a particular use of cash flow (e.g. capital expenditure) on the internally generated operating cash flow of a firm and a set of control variables. The estimation of the regression model is done by ordinary least squares regressions. For robustness, the authors also estimate the models using system generalised method of moments to control for endogeneity and measurement error problems. Findings The authors find that managers of African firms hold most of their internally generated cash flows, and when they decide to spend, they allocate a higher proportion towards dividend payments; followed by debt adjustments; then to investments; and lastly, to equity repurchases. Research limitations/implications The findings are consistent with the existence of a significant financial constraint in African markets, and the use of dividends to signal credit quality in relatively underdeveloped capital markets. Originality/value The authors provide a more extensive analysis of how a firm spends a unit of the incremental cash flow it generates. In particular, the analysis shows that beyond investments in capital expenditure, other cash flow uses (i.e. cash holdings, dividend payments, and adjustments in debt and equity capital) which have been largely overlooked in the literature are important to understanding the effects of financial constraints on corporate decisions. Also, the early empirical evidence on the cash flow allocations of African firms could be a step in the right direction in informing theory development in this area.

Reading the past to imagine the future

2015 ◽  
Vol 10 (4) ◽  
pp. 363-366
Author(s):  
Silvia Gherardi
Keyword(s):  
Qualitative Research ◽  
Qualitative Methods ◽  
Design Methodology ◽  
Personal Reflection ◽  
Research Topics ◽  
Content Type ◽  
Distinctive Features ◽  
The Past ◽  
The Future

Purpose – The purpose of this paper is to contribute to the ten years of the journal through a personal reflection. Design/methodology/approach – A review of the articles published in the last ten years. Findings – I argue that what has distinguished QROM in these ten years are two distinctive features: reflexivity on practices of qualitative research, and openness to the application of qualitative methods to unusual research topics. Originality/value – The main limit of the paper resides in the subjectivity of the person who has read the articles. Other readers may have different opinions and may have chosen different criteria.

The public-private partnership valuation paradox

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephen Gray ◽  
Jason Hall ◽  
Grant Pollard ◽  
Damien Cannavan
Keyword(s):  
Mathematical Proof ◽  
Systematic Risk ◽  
Cash Flows ◽  
Current Theory ◽  
Apparent Paradox ◽  
Content Type ◽  
The Public ◽  
The Past ◽  
Alternative Approaches ◽  
Practical Implications

Purpose In the context of public-private partnerships (PPPs), it has been argued that the standard valuation framework produces a paradox whereby government appears to be made better off by taking on more systematic risk. This has led to a range of approaches being applied in practice, none of which are consistent with the standard valuation approach. The purpose of this paper is to demonstrate that these approaches are flawed and unnecessary. Design/methodology/approach The authors step through the proposed alternative valuation approaches and demonstrate their inconsistencies and illogical outcomes, using theory, logic and mathematical proof. Findings In this paper, the authors demonstrate that the proposed (alternative) approaches suffer from internal inconsistencies and produce illogical outcomes in some cases. The authors also show that there is no problem with the current accepted theory and that the apparent paradox is not the result of a deficiency in the current theory but is rather caused by its misapplication in practice. In particular, the authors show that the systematic risk of cash flows is frequently mis-estimated, and the correction of this error solves the apparent paradox. Practical implications Over the past 20 years, PPP activity around the globe amounts to many billions of dollars. Decisions on major infrastructure funding are of enormous social and economic importance. Originality/value To the best of the authors’ knowledge, this study is the first to demonstrate the flaws and internal inconsistencies with proposed valuation framework alternatives for the purposes of evaluating PPPs.

Cash flow as a key indicator of production and personal financial activity

2021 ◽  
pp. 302-309
Author(s):  
Ekaterina Olegovna Boyko
Keyword(s):  
Financial Performance ◽  
Cash Flow ◽  
Financial Activity ◽  
Key Indicator ◽  
The Future ◽  
The Difference

Cash flow is an indicator showing the difference between income and expenses for a certain period. Cash flow takes into account the activities from investment, business, employment, charity and other monetary activities, as well as one’s costs, mandatory and optional, and other expenses. Such designation as «cash flow» is used both in business and in private. Cash flow determines solvency, plans for the future, past expenses and even possible bankruptcy. Why is cash flow a key indicator of financial performance?

Does capacity utilisation influence financial performance? A study of Indian public bus transport companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shivam Kushwaha ◽  
Shankar Prawesh ◽  
Anand Venkatesh
Keyword(s):  
Financial Performance ◽  
Public Transport ◽  
Ordinary Least Squares ◽  
Positive Influence ◽  
Data Envelopment ◽  
Truncated Regression ◽  
Capacity Utilisation ◽  
Content Type ◽  
Unit Increase ◽  
Unused Capacity

PurposeThe objective of the paper is to get a better understanding of capacity utilisation (CU) in Indian public bus companies. More specifically, this paper would be measuring CU and identifying the drivers of the same. Finally, the influence of CU on the financial performance of Indian bus companies is examined.Design/methodology/approachThe study adopted data envelopment analysis (DEA) to measure the CU in Indian public bus companies. Truncated regression was used to identify the drivers of CU. Subsequently, the ordinary least squares (OLS) regression was used to analyse the influence of CU on Indian bus companies' financial performance. The period of study was from 2013 to 17.FindingsThe significant drivers of CU were fleet age, passenger lead and fleet utilisation. Additionally, it was found that CU had a significant positive influence on the financial performance of Indian public bus companies and a unit increase in unused capacity has led to an increase of 7% in the operating ratio of the bus companies.Practical implicationsGetting insights into CU, apart from technical efficiency, is of immense use to both public transport researchers and practitioners. Managers of public bus companies should be mindful of CU as it has a significant bearing on their financial performance.Originality/valueThis is the first study in public transport, which establishes the linkage between CU and financial performance. Besides, a modified measure of cost-efficiency has also been conceptualised in this study.

China-EU academic links will face closer scrutiny

2021 ◽  
Keyword(s):  
Research Output ◽  
Research Institutions ◽  
Independent Research ◽  
Content Type ◽  
The Past ◽  
The Future ◽  
Potential Risks ◽  
National Governments

Significance European academic and research institutions have built increasingly close links with China over the past two decades. By doing so they have increased their incomes and research output, and reduced their costs. Benefits have been emphasised and the potential risks downplayed, both at the institutional and government levels. Impacts National governments will face calls to compensate for the reduction in funding and fees from China. European independent research on China will grow increasingly difficult. Researchers and institutions must prepare for potential Chinese sanctions in the future.

The futures of the University of Tehran using causal layered analysis

foresight ◽  
2018 ◽  
Vol 20 (4) ◽  
pp. 393-415 ◽  
Author(s):  
Mohammadali Baradaran Ghahfarokhi ◽  
Ali Mohaghar ◽  
Fatemeh Saghafi
Keyword(s):  
Higher Education ◽  
Current System ◽  
Content Type ◽  
Balance Sheets ◽  
Master Plans ◽  
Wide Range ◽  
The Future ◽  
Causal Layered Analysis ◽  
The Times ◽  
The University

PurposeHigher education and universities have faced unprecedented and ubiquitous changes. The University of Tehran or “UT,” as the leading university in Iran, is not immune to these changes. The purposes of this study is to investigate the current situation and future of the UT and gain insights and possible responses to changes that suit its strengths and potential to progress in an increasingly competitive, complex environment with uncertainties. It identifies deep fundamental underpinnings of the issue and highlights them for policymakers to formulate strategies and future vision of the UT.Design/methodology/approachCausal layered analysis (CLA) was applied as a framework and the data collected from different sources such as literature reviews, content analysis of rules, regulations and master plans of the university and coded interviews of four different groups of university stakeholders were analyzed. The current system of UT, as well as hidden beliefs, that maintains traditional perceptions about university was mapped. Next, by applying a new recursive process and reverse CLA order, new CLA layers extracted through an expert panel, the layers of CLA based on new metaphors to envision future of UT were backcasted.FindingsThe results from CLA layers including litany, system, worldview and metaphor about the current statue of UT show disinterest and inertia against changes, conservative, behind the times and traditional perceptions, and indicate that the UT system is mismatched to the needs of society and stakeholders in the future. The authors articulated alternative perspectives deconstructed from other worldviews so there are new narratives that reframe the issues at hand. The results show that to survive in this fast-paced revolution and competition in higher education, UT should develop scenarios and formulate new strategies.Research limitations/implicationsThe authors had limited access to a wide range of stakeholders. As the UT is a very big university with so many faculties and departments, to access a pool of experts and top policymakers who were so busy and did not have time to interview inside and outside of university was very hard for the research team. The authors also had limitation to access the internal enactments and decisions of the trustee board of the UT and the financial balance sheets of the university.Originality/valueIn this paper, by mixing different methods of futures studies, the authors have shown how to move forward while understanding the perspectives of stakeholders about the future of UT by a new recursive process and reverse CLA order. A supplementary phase was added to improve CLA and to validate the method and results, which were ignored in previous studies.

Minds and brains: angels, humans, and brutes

1982 ◽  
Vol 57 (3) ◽  
pp. 309-315
Author(s):  
Mortimer J. Adler
Keyword(s):  
Nervous System ◽  
Animal Behavior ◽  
Personal Experience ◽  
Human Beings ◽  
Content Type ◽  
The Past ◽  
Wide Range ◽  
Conceptual Thought ◽  
The Brain ◽  
Fine Print

✓ In his 1982 Cushing oration, a distinguished philosopher, author, and discerning critic presents a distillate of his phenomenally wide range of personal experience and his familiarity with the great books and teachers of the present and the past. He explores the differences and relationships between human beings, brute animals, and machines. Knowledge of the brain and nervous system contribute to the explanation of all aspects of animal behavior, intelligence, and mentality, but cannot completely explain human conceptual thought.

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