• Title/Summary/Keyword: Cash Flow

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The Effects of the Elements of Cash Flow and Accrual on the Consistency of Cash Flow and on the Firm's Value (현금흐름과 발생액 및 구성요소들이 현금흐름의 지속성과 기업가치에 미치는 영향)

  • Park, Chang-Rae;Lee, Sang-Hee
    • Korean Business Review
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    • v.22 no.2
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    • pp.61-86
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    • 2009
  • The purpose of this article is to investigate the effects of cash flow and accrual, which are the elements of earnings, and those of the elements of cash flow and accrual on the consistency of cash flow and firm's value. We analyzed 4 kinds of regression models, of which the independent variables are this period's cash flow, the elements of cash flow, accrual, and the elements of accrual, and the dependent variables are the next period's cash flow, and the stock price at the end of financial statements disclosure months, respectively. The sample firms were the manufacturing companies listed on the Stock Exchange 1980 through 2006, of which the fiscal year ended in December. And, the results of the analyses are as follows: Cash flow and accrual are shown to have significant relationships with cash flow consistency and the evaluations of firms' value. And, the elements of cash flow or accrual proved to have more influence than the total amount of them, on cash flow consistency and the evaluation of firms' value. Also, the results present that some of the elements of cash flow and accrual differently affect cash flow consistency and the evaluation of firms' value. Accordingly, this study indicates that each of the elements of cash flow and accrual needs to be considered respectively rather than the total amount of them, in the case that cash flow and accrual are used in the decision-making concerned with the forecast of cash flow and the evaluation of firms' value. This study also shows that each element of cash flow and accrual needs to be used differently for cash flow forecast and the evaluation of firms' value.

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Free Cash Flow, Agency Conflicts, and Compensation Plans in a Non-growing Industry

  • Park, Sang-Bum
    • The Korean Journal of Financial Studies
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    • v.10 no.1
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    • pp.249-269
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    • 2004
  • Free cash flow is known as a typical type of agency conflict between managers and shareholders in a firm. The insurance industry, which is not growing, is particularly susceptible to such excessive cash flow. We herein investigate the effects of stock ownership plans on reducing agency conflicts. We adopt undistributed cash flow to proxy free cash flow, and size, default risk, group membership, leverage, investment opportunity, and stock options are selected as explanatory variables. We find that stock option plans are effective(at a 10% level) in reducing free cash flow.

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A Study on the Predictability of Hospital's Future Cash Flow Information (병원의 미래 현금흐름 정보예측)

  • Moon, Young-Jeon;Yang, Dong-Hyun
    • Korea Journal of Hospital Management
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    • v.11 no.3
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    • pp.19-41
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    • 2006
  • The Objective of this study was to design the model which predict the future cash flow of hospitals and on the basis of designed model to support sound hospital management by the prediction of future cash flow. The five cash flow measurement variables discussed in financial accrual part were used as variables and these variables were defined as NI, NIDPR, CFO, CFAI, CC. To measure the cash flow B/S related variables, P/L related variables and financial ratio related variables were utilized in this study. To measure cash flow models were designed and to estimate the prediction ability of five cash flow models, the martingale model and the market model were utilized. To estimate relative prediction outcome of cash flow prediction model and simple market model, MAE and MER were used to compare and analyze relative prediction ability of the cash flow model and the market model and to prove superiority of the model of the cash flow prediction model, 32 Regional Public Hospital's cross-section data and 4 year time series data were combined and pooled cross-sectional time series regression model was used for GLS-analysis. To analyze this data, Firstly, each cash flow prediction model, martingale model and market model were made and MAE and MER were estimated. Secondly difference-test was conducted to find the difference between MAE and MER of cash flow prediction model. Thirdly after ranking by size the prediction of cash flow model, martingale model and market model, Friedman-test was evaluated to find prediction ability. The results of this study were as follows: when t-test was conducted to find prediction ability among each model, the error of prediction of cash flow model was smaller than that of martingale and market model, and the difference of prediction error cash flow was significant, so cash flow model was analyzed as excellent compare with other models. This research results can be considered conductive in that present the suitable prediction model of future cash flow to the hospital. This research can provide valuable information in policy-making of hospital's policy decision. This research provide effects as follows; (1) the research is useful to estimate the benefit of hospital, solvency and capital supply ability for substitution of fixed equipment. (2) the research is useful to estimate hospital's liqudity, solvency and financial ability. (3) the research is useful to estimate evaluation ability in hospital management. Furthermore, the research should be continued by sampling all hospitals and constructed advanced cash flow model in dimension, established type and continued by studying unified model which is related each cash flow model.

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A Method of Evaluating Profitability and Risk of Multiple Investments Applying Internal Rate of Return

  • Mizumachi, Tadahiro
    • Industrial Engineering and Management Systems
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    • v.9 no.2
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    • pp.121-130
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    • 2010
  • In today's uncertain economic environment, economic risk is inherent in making large investments on manufacturing facilities. It is, therefore, practically meaningful to divide investment over multiple periods, reducing the risk of investment. Then, the cash-flow over the entire planning horizon would comprise positive inflow and negative outflow. In this case, in general, evaluation by internal rate of return (IRR) is not feasible, because multiple IRRs are involved. This paper deals with a problem of evaluating profitability, as well as risk, of investment alternatives made in multiple times of investment over the entire horizon. Typically, an additional investment is required after the initial one, for expanding manufacturing capacity or other reasons. The paper pays attention to a unit cash-flow over two periods, decomposing the total cash-flow into a series of unit cash-flow patterns. It is easy to evaluate profitability of a unit cash-flow by using IRR. The total cash-flow can be decomposed into the series of two types of unit cash-flows: an investment type one (negative-positive) and the borrowing type one (positive-negative). This paper, therefore, proposes a method in which only the borrowing type unit cash-flow is eliminated in the series by converting total cash-flow using capital interest rate. Then, a unique IRR can be obtained and the profitability is evaluated. Thus, the paper extends the method of IRR so that it may help decision making in complicated cash-flow pattern observed in practice.

The Impact of Operating Cash Flow in Decision-Making of Individual Investors in Vietnam's Stock Market

  • NGUYEN, Dung Duc;NGUYEN, Cong Van
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.5
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    • pp.19-29
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    • 2020
  • The paper examines the impact of information about cash flow from operating activities of firms listed on Vietnam's stock market to the decision making of individual investors. Data were collected from interviews with 160 individual investors about their investment decisions based on information on profit growth and cash flow growth from operating activities. T-test was conducted to research on Vietnam's stock market - a market considered as information that is not really public, transparent and ineffective. The research results show that: (1) investors do not care about cash flow from operating activities when making investment decisions if the company's profits grow positively, (2) information about cash flow from operating activities only affects the decisions of individual investors once profit growth is negative, and (3) conflicting information between profit growth and cash flow growth from business activities significantly affects the confidence and comfort of investors in Vietnam's stock market when they make investment decisions. Then, the study points out the mistake of investors when making investment decisions, and offers recommendations to investors when making investment decisions, not only concerned with profit growth, but also paying special attention to cash flow growth, especially cash flow from the company's business operations.

The Impact of Cash Flow Statement on Lending Decision of Commercial Banks: Evidence from Vietnam

  • NGUYEN, Dung Duc;NGUYEN, Anh Huu
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.6
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    • pp.85-93
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    • 2020
  • The paper investigates the impact of the statement of cash flows of listed companies on lending decisions of commercial banks in the context of Vietnam. Survey data for the research were collected from 160 credit officers of Vietnamese commercial banks for short-term and long-term lending decisions, whether the cash flow statement includes complete information or has a lack of information. The cash flow statement, in which the information on the cash flow is completely contrary to the profit information on the income statement is examined. This paper employed T-tests to address the research issues in a market considered to be ineffective, like Vietnam. The research results show: (1) the information on the cash flow statement affects both the short-term and long-term lending decisions of credit officers, and (2) the lack of information on the cash flow statement in both cases of positive and negative profits affects the comfort and confidence of credit officers in making decisions. The research findings also indicate that cash flow statements are important for lending decisions of credit institutions in Vietnam. Therefore, this paper provides a new insight to managers on how to improve the quality of cash flow statement to meet the needs of lenders.

The Effect of Cash Flow Variation on Project Performance: An Empirical Study from Kuwait

  • AL-NASSAFI, Nawaf Marzouq
    • The Journal of Asian Finance, Economics and Business
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    • v.9 no.3
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    • pp.53-63
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    • 2022
  • Despite the relationship between cash flow, financial management, and project performance, no study examined the mediating role of financial management on the relationship between cash flow and construction project performance, especially in Kuwait. The goal of this study was to examine the impact of cash flow fluctuations on construction project performance, as well as the role of financial management in mediating this relationship. To accomplish these goals, the researcher employed a descriptive-analytical method to create a questionnaire of 31 items. The study's sample was chosen at random and includes (181) project managers and firm owners from contractors' companies in Kuwait. The study found a statistically positive and significant effect of cash flow variation on project performance from the perspective of Kuwaiti contractors at the significance level (0.05), as well as a mediated role of financial management in the relationship between cash flow variation and project performance. The research came up with a number of recommendations based on the findings, including the need for contractors to have a better understanding of cash flow to arrange project activities correctly and efficiently. Further studies may be included into the effect of cash flow forecasting (planning) and financial management (control) on various construction activities.

Analysis of Household Income and Expenditure of Households with a Negative Cash Flow Across Income Groups in 2000, 2005, and 2010 (소득계층별 적자가계의 소비 지출 분석: 2000, 2005, 2010년의 가계를 대상으로)

  • Lee, Jonghee;Yang, Sejeong
    • Journal of Families and Better Life
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    • v.32 no.5
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    • pp.125-143
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    • 2014
  • The purpose of this study was to gain a better understanding of households with a negative cash flow. The Household Budget Survey conducted in 2000, 2005, and 2010 by the Bureau of Statistics in South Korea were used for this study. The households used in this study were divided into four groups according to their income levels; they were categorized the lowest, low, middle, and high income groups. This study made several findings regarding households with a negative/positive cash flow. Firstly, the demographic and economic characteristics were different between those who have a negative cash flow and those with a positive cash flow. A female household head, a household head age 65 and older, a household head with a lower educational attainment, an unemployed household head, and the presence of a child/children in schools were related with the household deficit. Secondly, the households with a positive cash flow had a higher income level compared to the households with a negative cash flow, while the households with a negative cash flow had a much higher consumption level compared to the households with a positive cash flow. Thirdly, the household deficit to total income ratio of the lowest income group was higher when compared to any other income group. Lastly, the multivariate statistics showed that households including a child/children in schools are more likely to be a household with a negative cash flow. Especially, the expenditures on education and transportation were related with the likelihood of a household deficit.

Cash Flow Statement Preparation Using Accounts Reconciliation Method for IACF (계정조정 방식에 의한 산학협력단 현금흐름표 작성)

  • Kang, Jinhwa;Ahn, Jaekyoung
    • Journal of the Society of Korea Industrial and Systems Engineering
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    • v.41 no.2
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    • pp.47-55
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    • 2018
  • The Korean Ministry of Education (MOE) required cash flow statements, instead of fund statements, as a component of the financial statements of the Industry-Academic Cooperation Foundations (IACF) when it revised IACF accounting rules in 2012. While the fund statements were aligned its accounts to the operating statements' accounts level, the newly adopted cash flow statements' accounts retreated to two levels higher than those of the operating statements. It may be resulted from the consideration that IACFs' burden of preparing cash flow statements especially in direct method. To help IACFs prepare the cash flow statements, MOE's guidance on IACF accounting rules introduced cash flow statement preparation method and presented a practical example, but it did not check whether the accounts of the cash flow statement were reconciled to the accounts of corresponding balance sheet and operating statement. That means that the guidance still lacks how to assure it was accurately prepared. Our study proposed cash flow statement preparation using reconciliation method which reconciles cash flow statement accounts' amounts to balance sheet and operating statement accounts' amounts with integrity checking and also provided a practical example by using the same case in MOE's guidance on IACF accounting rules to help IACF accounting personnel to prepare a cash flow statement efficiently.

The Relationship of Cash Flow and External Funding in Hospital (의료기관 현금흐름과 외부자금조달 간의 관계)

  • Jung, Yong-Mo;Lee, Yong-Chul;Lim, Jeong-Do
    • The Korean Journal of Health Service Management
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    • v.4 no.1
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    • pp.87-97
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    • 2010
  • The study analyzed the cash flow and external funding in focusing on the relationship of the two factors in Korean hospitals and some changes in the relationship. The results analyzing this study were summarized as follows: First, the discriminant function of new external funds was generally the ratio of cash flow from operating activities to sales, the ratio of cash flow from investment activities to sales, the ratio of cash flow from financing activities to sales in order. The prediction rate of total discriminant function was more than 92%. Second, in case of Korean hospitals, it was known that the ratio of cash flow from operating activities to sales, particularly the net income to sales was the biggest influencing factor on the decision to external funding.