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Risk Pressure and Inventories Levels. Influence of Risk Sensitivity on Working Capital Level

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  • GRZEGORZ MICHALSki

    (Department of Corporate Finance Management, Wroclaw University of Economics, Poland)

Abstract

That paper as a continuation of the studies about financially efficient working capital decisions model components and its applications, presents discussion about risk sensitivity influence on enterprise decisions in area of net working capital investments. Effectiveness of net working capital investments is only one from possible explanations of liquidity measures in enterprises. Too small net working capital leads some enterprises to negative changes in their sale levels and as effect to weaker profits. Destruction of cash revenues creation possibilities is dangerous for them and is hard to rebuild possibilities to create cash revenues. Financially efficient working capital decisions predicts that before the crisis, during the crisis and after the crisis phases are connected with higher levels of working capital in processing enterprises. Investments in liquidity are a hedging instrument against individual risk sensitivity that is higher in crisis affected times. The paper aim is to compare real economy data with financially efficient working capital decisions predictions. The financially efficient working capital decisions model expected that liquidity measures like current liquidity indicator should be treated as forecasting indicator about future risk sensitivity of the entities. It could be also suitable as forewarning impulse of future standing of whole processing part of economy.

Suggested Citation

  • GRZEGORZ MICHALSki, 2016. "Risk Pressure and Inventories Levels. Influence of Risk Sensitivity on Working Capital Level," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(1), pages 189-196.
    • Handle: RePEc:cys:ecocyb:v:50:y:2016:i:1:p:189-196
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    References listed on IDEAS

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    Cited by:

    1. Sorin Gabriel Anton & Anca Elena Afloarei Nucu, 2020. "The Impact of Working Capital Management on Firm Profitability: Empirical Evidence from the Polish Listed Firms," JRFM, MDPI, vol. 14(1), pages 1-14, December.
    2. Bolek Monika, 2019. "Net Working Capital Strategy Influencing Beta Coefficient based on Companies Listed on Newconnect Alternative Exchange in Warsaw," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 15(2), pages 36-47, June.
    3. Agnieszka Bem & Rafał Siedlecki & Paweł Prędkiewicz & Patrizia Gazzola & Bożena Ryszawska & Paulina Ucieklak-Jeż, 2019. "Hospitals’ Financial Health in Rural and Urban Areas in Poland: Does It Ensure Sustainability?," Sustainability, MDPI, vol. 11(7), pages 1-17, April.

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    More about this item

    Keywords

    working capital; risk sensitivity; enterprise value creation; financial analysis.;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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