ASSESSING THE MORTALITY RISK OF A BUSINESS

1999 ◽  
Vol 07 (01) ◽  
pp. 65-88
Author(s):  
DENISE GUITHUES AMRHEIN ◽  
JEROME A KATZ
Keyword(s):  
Mortality Risk ◽  
Cash Flows ◽  
Net Income ◽  
Working Capital ◽  
Bottom Line ◽  
Business Decisions ◽  
Factors Affecting ◽  
Critical Measure ◽  
Start Up ◽  
A Company

A number of studies have examined the factors affecting the mortality risk of a business. One factor that has not been given sufficient attention is the area of cash flow and working capital management. In order to make informed business decisions, the business owner is dependent on cost estimates and other financial projections that provide a view of the business in its entirety. Regardless of whether a company is a start-up or an ongoing business, financial projections are crucial to successful management, providing an important test of feasibility for new firms and giving existing businesses a chance to spot problems and make corrections before it's too late. Ultimately, the true test of survivability of a business is its bottom line. However, in the interim, the degree of a company's liquidity provides a critical measure of its mortality risk. Even if a company is earning net income, it still takes cash to pay the bills. Properly managing the area of working capital and cash flows is essential to the survival and growth of a business. This is particularly true of smaller firms who experience different circumstances than large firms including fewer available resources.

scholarly journals Analysis of Feasibility and factors Affecting Production of Sweet Potato Farming On Coastal Land in Gadingsari Village, Sanden, Bantul

2021 ◽  
Vol 316 ◽  
pp. 02050
Author(s):  
Francy Risvansuna Fivintari ◽  
Apriliani Zulhijjah ◽  
Fitriyah Awaliyah
Keyword(s):  
Sweet Potato ◽  
Potato Production ◽  
Primary Data ◽  
Net Income ◽  
Working Capital ◽  
Crop Failure ◽  
Factors Affecting ◽  
Production Function Approach ◽  
K Fertilizer ◽  
Coastal Land

Sweet potato is a type of secondary crop that is widely cultivated by farmers. The problem often faced by farmers is crop failure caused by pests, diseases and drought. This study aims to descriptively analyze costs, income, net income, profits, and analyze the factors that affect the production of sweet potato farming on the coastal land of Gadingsari Village, Sanden District, Bantul. This study uses primary data from 120 farmers taken at random. Data were obtained by means of interviews through questionnaires. Analysis of costs, income and feasibility using a quantitative approach and analysis of the factors that affect the production of sweet potato on coastal land using the Cobb-Douglass production function approach. The results showed that sweet potato farming in Gadingsari Village was profitable with an income of Rp 2,247,361. Sweet potato farming is feasible to run based on R/C, working economy and working capital. Based on the results of Cobb Douglas analysis, seed, K fertilizer, and labor factors have a significant effect on sweet potato production in coastal land.

scholarly journals Accounting Policies in the Function of Quality Assessment of Financial Statements

2021 ◽  
Vol 59 (3) ◽  
pp. 357-373
Author(s):  
Jelena Raičević
Keyword(s):  
Quality Assessment ◽  
Financial Statements ◽  
Relevant Information ◽  
Cash Flows ◽  
Business Decisions ◽  
Financial Position ◽  
And Performance ◽  
Complex Relationships ◽  
A Company

Abstract Financial statements represent an instrument by which relevant information about a company is passed on to its users. Based on the information presented in the financial statements, i.e. information on the financial position and performance of the company, and generated cash flows and capital, users make business decisions. Specific accounting policies serve as the basis for the preparation of quality financial statements. Management is responsible for the preparation and presentation of financial statements and selects accounting policies. Although simple, the issue of choosing the accounting policies can be extremely delicate and complex. Besides management, there are other stakeholders who may be affected by this issue. As a consequence, there are complex relationships that affect the choice of accounting policies, and thus the quality of financial statements.

scholarly journals FACTORS ENSURING ENTERPRISE FINANCIAL STABILITY IN TIMES OF CRISIS

2020 ◽  
Vol 139 (5) ◽  
pp. 121-129
Author(s):  
Iryna M. Miahkykh ◽  
Mariana S. Shkoda ◽  
Andrii О. Radchenko
Keyword(s):  
Financial Management ◽  
Financial Stability ◽  
Company Performance ◽  
Internal Environment ◽  
Working Capital ◽  
Negative Effects ◽  
Effective Response ◽  
Factors Affecting ◽  
Financial Position ◽  
A Company

The insufficiency or lack of available diagnostic instruments to predict the probability of a company bankruptcy is associated with the absence of practices to capture downturn trends in financial and business performances which translates into a dangerous process of latent transition from the company temporary local inability into the total failure to meet its obligations, that is, to a loss of financial stability. The fundamental premises of this study is to identify the factors that ensure financial stability of an enterprise. To attain the research objectives, the method of statistical analysis and logical generalization has been employed to consider a pull of enterprises that are losing their solvency and are on the verge of bankruptcy; a substrate approach was implemented to justify and group a range of internal and external factors affecting the enterprise financial stability. This article argues that a critical indicator in evaluation of a company performance is assessing its financial position which affects its competitiveness, and guarantees to all parties and business participants (both the enterprise and partners) that the realization of common economic interests will be effective. The company financial and economic position when its solvency remains constant over time together with an optimal ratio of equity to debt capital is a certain indicator of a company financial stability. Most analytical studies on enterprise financial stability view the amount, allocation and use of working capital as the most significant indicators, their accounting provides further opportunities to evaluate financial stability and financial position of an enterprise, as well as to identify potential problems and concerns that will lay the basis for choosing a relevant crisis management strategy aimed at designing and implementing effective pathways to respond to crisis. Undoubtedly, it is advisable to obtain an aggregated index that takes into account all the enterprise activities. Such index should include the following indicators: working capital availability; return on capital; independence on external financing. Thus, the essential factors in enhancing the enterprise financial management in a market environment are continuous planned analysis and timely diagnosis of changes and trends in the enterprise external and internal environment, as well as timely and maximum effective response to such changes to ensure financial stability and solvency of the enterprise. In the current business realia, characterized by a high level of economic uncertainty, achieving strategic financial goals and ensuring long-term financial stability of an enterprise is impossible without building an effective strategic financial management framework, the integral elements of which are the mechanisms and systems of risk management to prevent a drop in financial stability and mitigate shocks from external and internal environment negative effects on enterprise activity, as well as creating favourable environment for efficient decision making and planned actions to promote enterprise development.

scholarly journals Net Operating Working Capital, Capital Budgeting, And Cash Budgets: A Teaching Example

2016 ◽  
Vol 9 (1) ◽  
pp. 31-38 ◽  
Author(s):  
James A. Turner
Keyword(s):  
Student Satisfaction ◽  
Cash Flow ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Net Income ◽  
Working Capital ◽  
Accrual Accounting ◽  
Operating Cash Flows ◽  
Present Information ◽  
Budgeting Process

Many introductory finance texts present information on the capital budgeting process, including estimation of project cash flows.  Typically, estimation of project cash flows begins with a calculation of net income.  Getting from net income to cash flows requires accounting for non-cash items such as depreciation.  Also important is the effect of changes in net operating working capital on cash flow.  While students readily understand how to account for depreciation when calculating cash flow, they typically have much more difficulty understanding how and why changes in working capital affect cash flows.  This paper develops a teaching example to show exactly how and why changes in net operating working capital affect cash flows.  The example shows how to derive operating cash flows for a proposed project using the accrual accounting method and then shows a cash budget for the same project.  Finally, the example shows that the discrepancy between the cash flows shown in the cash budget and the operating cash flows can be resolved by accounting for changes in working capital.  A survey of students in an MBA managerial finance course indicates student satisfaction with the teaching example and gives evidence that students prefer the teaching example to explanations of the effect of working capital on project cash flows given in the assigned text.

PENGARUH TOTAL HUTANG, MODAL KERJA, DAN PENJUALAN TERHADAP LABA BERSIH PADA PERUSAHAAN SUB SEKTOR BATU BARA TERDAFTAR DI BEI

2018 ◽  
Vol 3 (2) ◽  
pp. 155-164
Author(s):  
Ani Zahara ◽  
Rachma Zannati
Keyword(s):  
Firm Value ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Data Retrieval ◽  
Multiple Linear Regression Analysis ◽  
Net Income ◽  
Working Capital ◽  
Retrieval Technique ◽  
Total Debt ◽  
A Company

This study aims to determine and analyze the effect of total debt, working capital, and sales on net income. The object of this study is a company listed on the Indonesia Stock Exchange in the 2013-2017 period. The data retrieval technique used in this study is the purpose sampling method, which is based on the specified criteria. Data analysis techniques using multiple linear regression analysis method with analysis software Eviews 8.0. The findings are: (1) F test (simultaneous) in this study shows that total debt, working capital, and sales have a significant effect on net income, (2) T (partial) test in this study shows that total debt and sales have no effect significant to net income, while working capital has a significant effect on firm value. Keywords: Total Debt, Working Capital, Sales, Net Income

scholarly journals Pengaruh Modal Kerja Terhadap Penjualan dan Laba Bersih Pada Perusahaan Sub Sektor Food and Beverages Yang Terdaftar di Bursa Efek Indonesia Periode 2013-2017

2020 ◽  
Vol 8 (1) ◽  
pp. 7-13
Author(s):  
Atin Ari Mawar Astuti ◽  
Andria Referli ◽  
Milka Susana ◽  
Milka Susana
Keyword(s):  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Research Result ◽  
Secondary Data ◽  
Sampling Technique ◽  
Net Income ◽  
Working Capital ◽  
Food And Beverages ◽  
A Company ◽  
Positive Effect

In the activities of a company, the main problem is working capital. Working capital is the capital used to run a company’s operations. Because without sufficient working capital, the company will experience a financial crisis and the most worrying is bankruptcy. This research aims to knowing the effect of working capital on sales and net income in the Food and Beverages sub-sector companies listed on Indonesia Stock Exchange 2013-2017. The type of data used is secondary data, that is about financial statements. Sampling technique used purposive sampling as much 12 company’s. All data analyzed with classic assumption test, simple linear regression analysis, t test, determination coefficient. Research result indicate with significant level 0.05 that working capital has a positive effect on sales and net income.   Keyword : Working Capital, Sales, Net Income

scholarly journals The role of accrual estimation errors to determine accrual and earnings quality

2016 ◽  
Vol 24 (2) ◽  
pp. 98-115 ◽  
Author(s):  
Javad Izadi Zadeh Darjezi
Keyword(s):  
Standard Deviation ◽  
Cash Flow ◽  
Earnings Quality ◽  
Cash Flows ◽  
Working Capital ◽  
Bottom Line ◽  
Significant Information ◽  
Accrual Quality ◽  
Content Type

Purpose Managers, investors and security analysts all pay special attention to the bottom line of income statements and they miss significant information included in accruals about the quality of earnings. A considerable portion of the earnings-quality literature examines the possibility of using the accruals to shift reported income among fiscal periods. One of the main roles of working-capital accruals is to adjust the recognition of cash flows. This paper aims to focus on earnings quality by examining the working-capital accruals quality using the method of Dechow and Dichev (2002). Design/methodology/approach Following the Dechow and Dichev (2002) model, the result of this paper shows that accrual quality is related to the absolute magnitude of accruals negatively. Also, the standard deviation of accruals, cash flows, sales and earnings is positively related to firm size. The result demonstrates and suggests that these observable firm characteristics can be used as instruments for measuring accrual quality. According to this framework, the author expects that the larger the unsigned abnormal accrual measure, the lower the earnings quality. Therefore, firms with low accrual quality have more accruals that are unrelated to cash flow realisations and so have more noise and less persistence in their earnings. Findings After examining earnings and accrual quality, this paper finds that average UK company behaviour was quite similar to the behaviour found earlier in the USA. This paper’s findings show that greater volatility of sales, cash flow, accruals and earnings results in a lower accrual quality. Without a doubt, some of the analysis in this paper, especially that using different equations to calculate working-capital accruals, leads us to a valuable improvement of the earlier studies. Originality/value In this paper, the author follows the method of Dechow and Dichev (2002) and define accrual quality as the extent to which accruals map into cash-flow insights based on the UK data. To find the quality of working-capital accruals, the author uses the standard deviation of the residuals as accrual quality that resulted from the author’s firm-specific OLS regressions of working-capital accruals based on last, current and one-year-ahead operating cash flow. Unlike prior research, to avoid a restriction to working-capital accruals, we use different equations to cover more items of working-capital accruals.

scholarly journals THE EFFECT OF WORKING CAPITAL MANAGEMENT ON FINANCIAL PERFORMANCE AND OPERATIONAL CASH FLOWS OF COMPANIES ACCEPTED IN TEHRAN SECURITIES EXCHANGE

2019 ◽  
Vol 7 (6) ◽  
pp. 625-632
Author(s):  
Ali Asghar Sameni ◽  
Razieh Fakour
Keyword(s):  
Financial Performance ◽  
Cash Flow ◽  
Cash Flows ◽  
Net Income ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Operating Profit ◽  
Operating Cash Flow ◽  
The Difference

Purposes: Working capital management can have a huge impact on financial performance and operational cash flows. In this research, the effect of working capital management components on financial performance and operating cash flows have been investigated. Methodology: The data used in this study are financial statements of companies listed in Tehran securities exchange for the period 2007 to 2011. Results: The difference between sales and operating profit as a benchmark for measuring performance and the difference between operating cash flow and operating profit as a measure of operating cash flow has been used. Regression results show that there is no meaningful relationship between the components of working capital management with financial performance and operating cash flow. Implications/Applications: Net income represents the change in a business's financial circumstances incurred through that business choosing to run its revenue-producing operations for one specific time period. Because the business cannot choose to run its revenue-producing operations without incurring expenses while doing so, net income is equal to revenues minus expenses. Expenses are often divided up into additional categories for ease of comprehension. Revenues minus cost of sales is equal to gross profit; gross profit minus operating expenses is equal to operating profit. Novelty/Originality: The novelty of this study is a balance between current assets and current liabilities, as well as maintaining a balance between profitability and liquidity which can serve a great purpose in the economy.

scholarly journals Integral Analysis of RCA of Irkutsk Region Companies

2021 ◽  
Vol 110 ◽  
pp. 01003
Author(s):  
Evgeniy A. Filatov
Keyword(s):  
Financial Stability ◽  
Raw Materials ◽  
Working Capital ◽  
Factors Affecting ◽  
Accounts Receivable ◽  
Successful Solution ◽  
Methodical Approach ◽  
Irkutsk Region ◽  
The Russian Federation ◽  
A Company

The financial position of a company depends on its liquidity, or otherwise, on how soon the funds invested in the assets turn into real money. The growth of non-payments complicates the company’s rhythmic activities (purchase of raw materials, payment of labor and other expenses generated from revenue) and leads to an increase in accounts receivable. At the same time, excessive diversion of funds to production stocks, work in progress, finished products, etc. leads to the deadening of resources and inefficient use of working capital. Successful solution of the problem of working capital optimization can significantly increase the financial stability of the company, refinance and repay the debt, and significantly facilitate debt restructuring. Therefore, effective management of the company’s working capital is the key to increasing the turnover of property and sales volumes. It involves not only the search for and attraction of additional sources of financing, but also their rational placement in the current assets of the company. The article presents the author’s model of analyzing the profitability of working capital. The article reveals the influence of factors affecting the profitability of working capital and author’s methodical approach to his calculations (method # 2 integral factor analysis, developed by Filatov E.A.). The article presents the author’s analytical, systematic statistical analysis of key performance indicators reveal the influence to change the profitability of working capital of the companies in the Irkutsk region of the Russian Federation.

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