By G. Michalski
Value-Based operating Capital administration analyzes the factors and results of incorrect money stream administration among entrepreneurial corporations with various degrees of chance. This paintings appears on the factors and standards for decision-making via marketers of their efforts to guard the monetary defense in their companies and deal with monetary liquidity. Michalski argues that companies uncovered to bigger threat want a diversified method of coping with liquidity degrees.
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Extra resources for Value-Based Working Capital Management: Determining Liquid Asset Levels in Entrepreneurial Environments
Example text
2. The relationship of accounts receivables and total assets depends on the risk-sensitivity level (Michalski 2012c; Nowak 1995; Myers 2001; Ozkan 2001). In manufacturing firms that usually operate with full-operation cycles, the growth of risk sensitivity is a basis for growth of the relation between accounts receivables and total assets (Fewings 1996; Fernandez 2002; Harris, and Raviv 1991). In a crisis context, the relationship between accounts receivables and total assets could be treated as an early warning signal of an impending increase in the threat of financial difficulties.
Here we have listed separately the ability to make purchases and the ability to settle financial obligations. They are not two separate features of enterprise liquidity, but only on the assumption that all purchases are made by the enterprise on the basis of trade credit. ) Sometimes, however, especially in the case of enterprises, purchases are made also on the basis of immediate payment. The term full amount of the obligation indicates that the enterprise facing the need to repay the obligations did not make unilateral modifications to the amount of the obligation.
The same effect should be observed with cash and accounts receivables (Michalski 2012a; Opler, Pinkowitz, Stulz, and Williamson 1999; Shapiro 1990). As firms answer to higher risk sensitivity, we expect that empirical data should confirm higher accounts-receivables levels in relation to totalassets levels and higher cash and cash-equivalents levels to total assets during the crisis and after the crisis. In our data we treat the periods 2004−06 as before the crisis, period 2007−09 as during the crisis, and 2010−12 as after the crisis.