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Cash-Flow Sensitivity To Payments For Material Ressources

Author

Listed:
  • Lavinia Elena BRÎNDESCU OLARIU

    (BRD – Groupe Societe Generale)

Abstract

The financing decision is taken based on the expectations concerning the future cash-flows generated in the operating activity, which should provide coverage for the debt service and allow for an increase of the shareholders’ wealth. Still, the future cash-flows are affected by risk, which makes the sensitivity analysis a very important part of the decision process. The current research sets to evaluate the sensitivity of the payment capacity to variations of the payments for raw materials and consumables. The study employs 391 forecasted yearly cash-flow statements collected from 50 companies together with detailed information concerning the hypotheses of the forecasts. The results of the study allow for the establishment of benchmarks for the payment capacity’s sensitivity, the determination of the mechanisms through which the variation of payments for raw materials and consumables impacts the payment capacity, as well as the identification of the possible causes of such a variation.

Suggested Citation

  • Lavinia Elena BRÎNDESCU OLARIU, 2014. "Cash-Flow Sensitivity To Payments For Material Ressources," Management Intercultural, Romanian Foundation for Business Intelligence, Editorial Department, issue 32, pages 21-28, December.
    • Handle: RePEc:cmj:interc:y:2014:i:32:p:21-28
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    More about this item

    Keywords

    Forecasting; Investment; Sensitivity; Risk; Cash-flow; Financial analysis;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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