Does direct cash flow presentation help in predicting future operating cash flow?

Research literature and regulators are unconditional in pointing the disclosure of operating cash flow through direct method a section of unique information. Besides the intuitive facet, it is also consistent in forecasting future operating cash flows and a cohesive piece to financial statement puzzle. Bearing this in mind, I produce an analysis on the usefulness and predictive ability on the disclosure of gross cash receipts and payments over the disclosure of reconciliation between net income and accruals for two markets with special features, Portugal and Spain. Results validate the usefulness of direct method format in predicting future operating cash flow. Key

Reporting cash flow evidence from campanies listed in the Euronext Lisbon

Based on the 2013 and 2014 consolidated statements of cash flows of companies listed in Euronext Lisbon, this Work Project analyses the cash flow disclosures, namely if they are in accordance with International Accounting Standards 7, specifically the format, the choice of classification interests, dividends paid and received and the composition of cash and cash equivalents. Additionally, quality of income ratio is analyzed due to its importance for users of financial statements. The results show evidence of uniformity and consistency in the use of the direct method for reporting operational activities in both years, but there are some differences regarding the disclosure of interests and dividends, paid and received, respectively.

Market rewards to patterns on increasing earnings: do cash flow patterns, accruals manipulation and real activities manipulation matter?

This study explores whether firms have differential price-earnings multiples associated with their means of achieving a sequential pattern of increasing positive earnings. Our main findings show that market participants assign higher price-earnings multiples to firms when their pattern of increasing earnings is supported by the same pattern of increasing cash flows. Market participants assign lower price-earnings multiples to firms suspect of having engaged in accrual-based earnings management, sales manipulation, and overproduction to achieve the earnings pattern. We find, however, that market participants do not penalize firms suspect of having achieved the earnings pattern through the opportunistic reduction of discretionary expenses.

Pienyrityksen arvonmäärityksen erityispiirteitä

Tutkielmassa tarkastellaan listaamattoman pienyrityksen arvonmääritystä ja sen sisältöä. Tutkielman tavoitteena oli selvittää pk-yrityksen arvonmäärityksen erityispiirteitä ja eroja suuriin julkisiin yrityksiin sekä tutkia näiden erojen vaikutusta arvonmääritysprosessiin. Tutkielman lähestymistapa on teoreettinen ja tutkielma toteutettiin kirjallisuustutkimuksena. Tutkimusote on käsiteanalyyttinen. Tutkimuksessa havaittiin, että listaamattoman pienyrityksen erityispiirteitä ovat saatavissa olevan taloudellisen informaation laatu ja määrä, tulevaisuuteen liittyvä suurempi epävarmuus sekä omistuksen heikko likvidisyys. Pienyrityksiin liittyvät riskit ovat myös suuremmat ja niiden arviointi on vaikeampaa. Lisäksi pienyrityksen rahoitus eroaa suurista yrityksistä. Näiden tekijöiden vaikutus eri menetelmillä laskettuun yrityksen arvoon on negatiivinen. Osaamisella ja aineettomalla pääomalla on suuri vaikutus pienyrityksien arvoon ja tämä johtaa usein arvostuksen subjektiivisuuteen. Lähtökohtaisesti, pienen ja keskisuuren, kuten suurenkin yrityksen arvo perustuu tulevaisuuden tuottoihin omistajille. Toimintahistorian ja taloudellisen informaation vähäisyydestä johtuen arvostuksessa käytetään varsin usein hyvin yksinkertaisia tapoja ja menetelmiä. Perinteiset arvonmääritysmenetelmät ovat käyttökelpoisia myös pienyritysten kohdalla, kunhan niiden pohjana olevat parametrit, arvonmäärityksen tarkoitus ja tilanne sekä kohteen ominaispiirteet ymmärretään oikein. Pienyritysten arvomääritys on haastavaa ja asettaa suuria vaatimuksia suorittajan ammattitaidolle.

Development of project cash flow forecasting process

Process management refers to improving the key functions of a company. The main functions of the case company - project management, procurement, finance, and human resource - use their own separate systems. The case company is in the process of changing its software. Different functions will use the same system in the future. This software change causes changes in some of the company’s processes. Project cash flow forecasting process is one of the changing processes. Cash flow forecasting ensures the sufficiency of money and prepares for possible changes in the future. This will help to ensure the company’s viability. The purpose of the research is to describe a new project cash flow forecasting process. In addition, the aim is to analyze the impacts of the process change, with regard to the project control department’s workload and resources through the process measurement, and how the impacts take the department’s future operations into account. The research is based on process management. Processes, their descriptions, and the way the process management uses the information, are discussed in the theory part of this research. The theory part is based on literature and articles. Project cash flow and forecasting-related benefits are also discussed. After this, the project cash flow forecasting as-is and to-be processes are described by utilizing information, obtained from the theoretical part, as well as the know-how of the project control department’s personnel. Written descriptions and cross-functional flowcharts are used for descriptions. Process measurement is based on interviews with the personnel – mainly cost controllers and department managers. The process change and the integration of two processes will allow work time for other things, for example, analysis of costs. In addition to the quality of the cash flow information will improve compared to the as-is process. Analyzing the department’s other main processes, department’s roles, and their responsibilities should be checked and redesigned. This way, there will be an opportunity to achieve the best possible efficiency and cost savings.

Modelos de presupuestación de capital en finanzas corporativas y utilidad de los mismos

La siguiente investigación describe una aproximación teórica al tema de los modelos de presupuestación de capital, el objetivo fundamental se basa en comprender su enfoque e importancia al momento de tomar decisiones de inversión por parte de los directores de una empresa, así como de prever los efectos de esta en un futuro. Al respecto, y sobre la base de que los modelos de presupuestación de capital son herramientas para analizar posibles erogaciones de capital por parte de una empresa, es necesario para efectos del presente proyecto de investigación, definir sus diferentes modelos desde lo teórico y metodológico, explicando los diferentes conceptos relacionados con el tema. Así mismo, se explican algunos de los indicadores financieros utilizados en las compañías para medir y estimar la “salud financiera” de la empresa, además de puntualizar su impacto en la perdurabilidad de las entidades, lo cual permite dar una visión más general sobre la importancia que trasciende de los indicadores financieros, generando un impacto positivo en la evolución o crecimiento de la organización. En complemento, la investigación aborda la presupuestación de capital de manera particular aplicado en la gestión empresarial, sean estas privadas o públicas (estatal y gubernamental). En este sentido, se abordan conceptos elaborados por diferentes académicos en los que se exponen algunas aproximaciones respecto al posible mejoramiento de la presupuestación para los sectores a los que pertenecen determinadas entidades. Finalmente, se presenta de manera explícita las conclusiones que surgieron a lo largo de la construcción del documento de investigación, con el fin de dar cumplimiento concreto al objetivo general del trabajo, el cual constituye una respuesta a la pregunta de investigación que se enunciará en el desarrollo del documento.

Cash flow management in construction firms

The level of insolvencies in the construction industry is high, when compared to other industry sectors. Given the management expertise and experience that is available to the construction industry, it seems strange that, according to the literature, the major causes of failure are lack of financial control and poor management. This indicates that with a good cash flow management, companies could be kept operating and financially healthy. It is possible to prevent failure. Although there are financial models that can be used to predict failure, they are based on company accounts, which have been shown to be an unreliable source of data. There are models available for cash flow management and forecasting and these could be used as a starting point for managers in rethinking their cash flow management practices. The research reported here has reached the stage of formulating researchable questions for an in-depth study including issues such as how contractors manage their cash flow, how payment practices can be managed without damaging others in the supply chain and the relationships between companies’ financial structures and the payment regimes to which they are subjected.

Administração baseada em valor : uma abordagem conceitual comparada com a realidade de uma empresa do ramo de telecomunicações

O presente trabalho trata da Administração Baseada em Valor (VBM do inglês Value Based Management), que é uma ferramenta de auxílio à administração de empresas, que busca a identificação de value drivers, que são controles internos a serem monitorados, que devem abranger os principais pontos vistos pelo mercado como criadores de valor, pois o objetivo central da VBM é a majoração de valor para o acionista. A VBM também se utiliza do fluxo de caixa descontado (DCF do inglês Discounted Cash Flow). O objetivo central desta dissertação é fazer uma análise comparativa da estrutura interna de funcionamento e acompanhamento e dos controles de uma organização do segmento de telecomunicações com a filosofia da VBM, identificando o distanciamento de uma para com a outra. A empresa pesquisada é a Dígitro Tecnologia Ltda., de Florianópolis, que não utiliza a VBM. É uma pesquisa quantitativa e foi desenvolvida através do método de estudo de caso. Sua investigação foi dividida em três pontos principais: (1) a identificação, na empresa, da estrutura básica necessária para a implantação da Administração Baseada em Valor, (2) os itens necessários para se montar um DCF e (3) os controles internos possuídos pela organização, que possam servir como value drivers ou suas intenções de implantar controles. O estudo de caso foi único e exploratório, contando com a aplicação de entrevistas semi-estruturadas, observação direta e coleta de documentos. Conclui-se que a organização pesquisada está distante da filosofia da VBM, porém, com intenção de utilizar-se de inúmeros conceitos da Administração Baseada em Valor para auxiliar sua gestão.

Cash flow and discount rate risk decomposition and ICAPM for the US and brazilian stock markets

Esse trabalho é uma aplicação do modelo intertemporal de apreçamento de ativos desenvolvido por Campbell (1993) e Campbell e Vuolteenaho (2004) para as carteiras de Fama-French 2x3 brasileiras no period de janeiro de 2003 a abril de 2012 e para as carteiras de Fama-French 5x5 americanas em diferentes períodos. As varíaveis sugeridas por Campbell e Vuolteenaho (2004) para prever os excessos de retorno do mercado acionário americano no period de 1929 a 2001 mostraram-se também bons preditores de excesso de retorno para o mercado brasileiro no período recente, com exceção da inclinação da estrutura a termo das taxas de juros. Entretanto, mostramos que um aumento no small stock value spread indica maior excesso de retorno no futuro, comportamento que não é coerente com a explicação para o prêmio de valor sugerida pelo modelo intertemporal. Ainda, utilizando os resíduos do VAR preditivo para definir o risco de choques de fluxo de caixa e de choques nas taxas de desconto das carteiras de teste, verificamos que o modelo intertemporal resultante não explica adequadamente os retornos observados. Para o mercado norte-americano, concluímos que a abilidade das variáveis propostas para explicar os excessos de retorno do mercado varia no tempo. O sucesso de Campbell e Vuolteenaho (2004) em explicar o prêmio de valor para o mercado norte-americano na amostra de 1963 a 2001 é resultado da especificação do VAR na amostra completa, pois mostramos que nenhuma das varíaveis é um preditor de retorno estatisticamente significante nessa sub-amostra.

EC94-852 Cash Flow Planning Form

This extension circular covers the following areas of a cash flow planning form: Beginning Cash Balance, Operating Sales (crop and hay, market livestock, livestock product, custom work); Capital Sales (breeding livestock, machinery and equipment); Personal Income (wages, interest); Operating Expenses (car/truck, chemicals, conservation, custom hire, feed purchased, fertilizers and lime, freight and trucking, gasoline, fuel and oil, insurance, labor hired, rents and leases, repairs and maintenance, seeds and plants, storage, warehousing, supplies, taxes, utilities, veterinary, breeding fees and medicine, feeder livestock); Capital Purchases (breeding livestock, machinery and equipment, family living withdrawals, personal investments, income and social security, term loan payments); Net Cash Available (operating loan borrowings, operating loan payments); and Ending Operating Loan Balance. Along with the Cash Flow Planning Form is a Projected Income Statement Form which covers Projected Business Income (operating sales, breeding livestock, estimated cash income adjustments, estimated gross revenues, estimated value of production); Project Business Expenses (cash operating, esimated operating, prepaid and supplies, cash investment in growing crops, accounts payable); Projected Net Income Summary (estimated net income from operations, estimated net business income, estimated net income after taxes, estimated earned net worth change); and a Physical Inventory Flows Worksheet.

Separation of Control and Cash-Flow Rights of State Owned Listed Enterprises: Channels of Expropriation after the Discriminated Share Reform in China

Literature on agency problems arising between controlling and minority owners claim that separation of cash flow and control rights allows controllers to expropriate listed firms, and further that separation emerges when dual class shares or pyramiding corporate structures exist. Dual class share and pyramiding coexisted in listed companies of China until discriminated share reform was implemented in 2005. This paper presents a model of controller to expropriate behavior as well as empirical tests of expropriation via particular accounting items and pyramiding generated expropriation. Results show that expropriation is apparent for state controlled listed companies. While reforms have weakened the power to expropriate, separation remains and still generates expropriation. Size of expropriation is estimated to be 7 to 8 per cent of total asset at mean. If the "one share, one vote" principle were to be realized, asset inflation could be reduced by 13 percent.

The impact of financial development and market conditions on investment-cash flow sensitivity: global evidence

In this study, we analyze the impact of financial development and market conditions on investment-cash flow sensitivity during the 2006-2014 for 76 countries. First, the results show a relationship between investment-cash flow sensitivity and an index of financial development and its components. Second, 68 countries are affected by the 2008-2009 financial crisis, but only 16 countries exhibit a higher investment-cash flow sensitivity during the crisis. Third, investment-cash flow sensitivity is lower in countries with a larger primary debt market, while the size of the primary equity market has no impact. Finally, analyzing investment-cash flow sensitivity over time, we find lower sensitivity during years associated with higher primary debt market activity.