Thesis (MBA)--Stellenbosch University, 2009. / ENGLISH ABSTRACT: In financial accounting and economics it is important to be in a position to determine replacement costs of assets. These costs are essential for application of inflation accounting , the calculation of Tobin's q ratio, as well as the calculation of the free cash flow (FCF) of a company. However, it proves to be a daunting challenge to calculate especially accurate replacement costs of a company's fixed assets, owing to the considerable effects that inflation, economic lifetime of fixed assets and procurement strategies have on the replacement cost, and consequently on the FCF of a firm . In determining the FCF of a company, it is essential to differentiate between the goals of a company to maintain fixed assets or to expand operations. This split is difficult to ascertain, as few companies in South Africa publish the split. In addition to this, it is important to distinguish between actual required replacement investment (RI) and that part of the RI that has conveniently been postponed. As a consequence, analysis of a company's financial statements to determine replacement costs and subsequent FCF is further complicated. In 2001 , Hall investigated the behaviour of the average age of fixed assets as calculated with the Cutler and Westwick (1973: 17) formula , by developing specific inflation adjustment models. Hall's (2001: 40) study provided insight into some of the factors that might influence the application of the Cutler and Westwick formula for the calculation of the average age of a firm 's fixed assets. This research report developed Hall's models further, and proved that the average age of fixed assets, as used in the determination of replacement cost of a company's fixed assets, could only be applied in zero inflation conditions. In positive inflation periods, the average age of fixed assets as per Cutler and Westwick's formula is understated, resulting in lower estimations of replacement costs. Consequently, the additional depreciation as determined for inflation accounting purposes is understated. In this research report, the models referred to above were developed further to determine the required maintenance (or RI) part of the investing decision relative to depreciation written off. This enabled the modelling of FCF for companies, assuming certain model restrictions, such as constant inflation, evenroll fixed asset replacement and similar economic lifetimes for all fixed assets. However, this only provides some insight into the trends of additional deprecation required for different situations, and cannot be used in practice as comparable practical situations do not exist. This study therefore concludes that the calculation of replacement cost for inflation accounting purposes proves to be a very complex problem. No simple or quick model currently exists for determining the replacement costs of fixed assets and subsequent FCF of a firm. It is recommended that, when determining the replacement costs of fixed assets, the detailed fixed asset register of the firm should be consulted in order to determine the unique asset investment and replacement strategies, as well as the split of the fixed assets in terms of different economic lifetimes. Once this information is available, unique models per company could be developed based on the applicable inflation rates. / AFRIKAANSE OPSOMMING: In finansiële rekeningkunde en ekonomie is dit belangrik om die vervangingswaarde van bates te kan bereken. Hierdie waardes is essensieël vir die toepassing van inflasieboekhouding, die berekening van Tobin se q-verhouding, sowel as die berekening van die vrye kontantvloei (VKV) van 'n maatskappy. Dit blyk egter 'n moeilike taak te wees om veral akkurate vervangingswaardes vir 'n maatskappy se vaste bates te bereken, as gevolg van die groet invloed wat inflasie, die ekonomiese leeftyd van die vaste bates en aankoopstrategieë het op die vervangingswaarde, en gevolglik op die VKV van 'n maatskappy. In die bepaling van die VKV van 'n maatskappy, is dit noodsaaklik om te onderskei tussen die doelwitte van die maatskappy om vaste bates te onderhou of om werksaamhede uit te brei. Hierdie onderskeid is moeilik om te bepaal, aangesien min maatskappye in Suid-Afrika dit publiseer. Ook is dit belangrik om te onderskei tussen werklik benodigde vervangingsinvestering (VVI) en daardie gedeelte van die VVI wat gerieflikheidshalwe uitgestel is. Die ontleding van 'n maatskappy se finansiële state ten einde vervangingswaarde en die daaropvolgende VKV te bereken, word gevolglik verder gekompliseer. In 2001 het Hall die gedrag van die gemiddelde ouderdom van vaste bates ondersoek met behulp van die Cutler en Westwick (1973: 17) formule, deur spesifieke inflasie aangepaste modelle te ontwikkel. Hall (2001 : 40) se studie het insig gebied in sommige van die faktore wat die toepassing van die Cutler en Westwick formule vir die berekening van die gemiddelde ouderdom van 'n maatskappy se vaste bates kan beïnvloed. Hierdie navorsingsverslag ontwikkel Hall se modelle verder en bewys dat die gemiddelde ouderdom van vaste bates, soos gebruik in die beraming van die vervangingswaarde van 'n maatskappy se vaste bates, net toegepas kan word in toestande van nul inflasie. In periodes van positiewe inflasie word die gemiddelde ouderdom, soos bepaal deur die Cutler en Westwick formule, te laag opgegee, met 'n gevolglike laer skatting van vervangingswaarde. Dit lei daartoe dat die addisionele waardevermindering, soos bepaal vir inflasieboekhoudingsdoeleindes, te laag opgegee word. In hierdie navorsingsverslag word die modelle waarna hierbo verwys is verder ontwikkel ten einde die vereiste instandhoudings- (of VVI-) gedeelte van die investeringsbesluit relatief tot waardevermindering te bepaal. Dit maak dit moontlik om die VKV van maatskappye te modelleer, met sekere modelbeperkings wat veronderstel word, soos konstante inflasie, vaste batevervanging volgens 'n harmonies opgeboude masjienpark, en soortgelyke ekonomiese leeftye vir aile vaste bates. Dit bied egter net 'n mate van insig in die patrone van addisionele waardevermindering wat vir verskillende situasies benodig word en kan nie in die praktyk aangewend word nie, aangesien vergelykbare praktiese situasies nie bestaan nie. Hierdie studie kom dus tot die gevolgtrekking dat die berekening van vervangingskostes vir die toepassing van inflasieboekhouding 'n baie komplekse probleem is. Geen maklike of vinnige model bestaan tans vir die bepaling van die vervangingswaarde van vaste bates en die gevolglike VKV van 'n maatskappy nie. Daar word aanbeveel dat, wanneer die vervangingswaarde van vaste bates bereken word, die gedetailleerde vaste bateregister van die maatskappy geraadpleeg moet word ten einde die unieke investering- en vervangingstrategieë, sowel as die skeiding van die vaste bates op grand van verskillende ekonomiese leeftye, te kan bepaal. Sodra hierdie inligting beskikbaar is, kan unieke modelle vir die maatskappy ontwikkel word op grand van die toepaslike inflasiesyfers.

This thesis presents various dynamic models of corporate decisions to address two main issues: investment distortions caused by debt financing and cash flow sensitivities. In the first chapter, four measures of investment distortion are computed. First, the effect of financing frictions is examined. The tax benefit of debt induces firms to increase their debt capacity and to invest beyond the first-best level on average. The cost of this investment distortion outweighs the tax benefit of debt. Second, Myers's (1977) debt overhang problem is examined in a dynamic framework. Debt overhang obtains on average, but not in low technology states. Third, there is no debt overhang problem in all technology states when debt is optimally put in place prior to the investment decision. Finally, the cost of choosing investment after the debt policy is examined. Equity claimants lose value by choosing to invest after their debt is optimally put in place because they do not consider the interaction between their investment choice and the debt financing conditions. The second chapter explores the impact of financial constraints on firms' cash flow sensitivities. In contrast to Fazzari, Hubbard, and Petersen (1988), cash flow sensitivities are found to be larger, rather than smaller, for unconstrained firms than for constrained firms. Then, why is investment sensitive to cash flow? In the two models examined in the second chapter, the underlying source of investment opportunities is highly correlated with cash flows. Investment may be sensitive to cash flow fluctuations simply because cash flows proxy for investment opportunities. This leaves two important questions. Can this chapter suggest a better measure of investment opportunities than Tobin's Q? Not a single measure for both the unconstrained and constrained firm models. Can this chapter suggest an easily observable measure of financial constraint? Yes: large and volatile dividend-to-income ratios.

Thesis (MTech (Cost and Management Accounting))--Cape Peninsula University of Technology, 2015. / The broad aim of this research was to investigate the working-capital management practices of Small Medium and Micro Enterprises (SMMEs) in the Cape Metropole. The study was motivated by a lack of research on the workingcapital management practices of SMMEs. Data was collected by means of a questionnaire that comprised closed-ended questions. The findings of the study indicate that most SMMEs manage their cash effectively; however only a minority hold cash for speculative purpose, invest their surplus cash profitably and use computers to manage cash. By contrast, only a minority of the SMMEs sell on credit. Of those that do, only a minority review their credit criteria annually, send reminders to debtors, charge interest for delayed payment, send prompt statements and use computers to manage their receivables. Likewise, only a minority of the SMMEs purchase on credit. Of those that do, a majority pay promptly to take advantage of discounts and thus only a minority settle their accounts on the last date allowed. Interestingly, most of the SMMEs that purchase on credit use computers to manage their payables. Only a minority of the SMMEs perceive a lack of skills, resources, personnel and time as factors that inhibit them from managing their workingcapital effectively. The findings of this study provide invaluable insights on the weaknesses in the working-capital management practices of SMMEs, which could be used to inform future endeavours of the Government when establishing interventions meant to improve the survival rates of these entities. The findings may also assist SMMEs to gauge and review their working management practices, particularly their receivables and payables, with a view to optimising the benefits derived from these components of working-capital.

This thesis presents various dynamic models of corporate decisions to address two main issues: investment distortions caused by debt financing and cash flow sensitivities. In the first chapter, four measures of investment distortion are computed. First, the effect of financing frictions is examined. The tax benefit of debt induces firms to increase their debt capacity and to invest beyond the first-best level on average. The cost of this investment distortion outweighs the tax benefit of debt. Second, Myers's (1977) debt overhang problem is examined in a dynamic framework. Debt overhang obtains on average, but not in low technology states. Third, there is no debt overhang problem in all technology states when debt is optimally put in place prior to the investment decision. Finally, the cost of choosing investment after the debt policy is examined. Equity claimants lose value by choosing to invest after their debt is optimally put in place because they do not consider the interaction between their investment choice and the debt financing conditions. The second chapter explores the impact of financial constraints on firms' cash flow sensitivities. In contrast to Fazzari, Hubbard, and Petersen (1988), cash flow sensitivities are found to be larger, rather than smaller, for unconstrained firms than for constrained firms. Then, why is investment sensitive to cash flow? In the two models examined in the second chapter, the underlying source of investment opportunities is highly correlated with cash flows. Investment may be sensitive to cash flow fluctuations simply because cash flows proxy for investment opportunities. This leaves two important questions. Can this chapter suggest a better measure of investment opportunities than Tobin's Q? Not a single measure for both the unconstrained and constrained firm models. Can this chapter suggest an easily observable measure of financial constraint? Yes: large and volatile dividend-to-income ratios. / Business, Sauder School of / Graduate

Cash decision-making involves the simultaneous consideration of financing and investment opportunities over a short-term planning horizon. Decision variables include timing, amount, and source of cash transactions. Decisions can be made regarding these variables such that the worth of the firm (i.e. outstanding investments less financing) at the end of the planning horizon is maximized. Because cash decision-making is often of critical importance to small business, this study focuses directly on the small business environment. Alternatives available to the small business are limited, as are the resources to evaluate alternatives. This stv.dy takes these factors into account by building a cash decision model which is specifically tailored to the small business, and implementing this model on a low-cost, high-powered microcomputer. The model itself is formulated as a linear program with a simple procedure included for handling noncontinuous variables. The model makes use of input generators for ease of implementation. A practical example problem is provided to illustrate the workings of the model. / Master of Science

Decreasing revenues and the public's natural antipathy towards taxes have made cash management crucial to the financial health of any organization. Local government financial executives have become increasingly aware that cash is an asset that must be used wisely, unless it is to become a liability. Thus, there have emerged serious efforts by local government finance executives to maximize the utility of every dollar available to their jurisdictions: first, by influencing the availability of receipts while delaying the outflow of funds; second, by investing available funds in interest yielding securities until the funds are needed to meet legal commitments and obligations. Although this perspective is easily stated, it is common knowledge that local jurisdictions encounter insurmountable obstacles in the effort to maximize the returns on their investments of temporarily idle funds. This study has evaluated local government cash management policies and practices with a view to identifying those factors militating against the efforts to achieve optimum returns on investments. A cash management questionnaire supplemented with very elaborate personal and telephone interviews constituted the diagnostic tool that facilitated the collection of the data necessary to: (a) develop an understanding of contemporary money management policies and practices in local governments; (b) evaluate the effectiveness of these policies and practices; (c) identify and describe the constraints that impede efforts to optimize investment returns in the public sector; and (d) develop strategies that will enable local government finance executives to cope with the identified constraints. The study found that local governments face three kinds of constraints in the attempt to maximize the return on their investments of financial assets. First, there are problems that are internal and peculiar to each local jurisdiction, such as inadequate resources: funds to invest and the skills to search for the right investment instruments under a given set of circumstances; second, there are legal and political constraints imposed by higher governments such as the requirement that public funds can only be invested in certain instruments, and the prescription that local governments do business with specified banks. In some jurisdictions, how much money should be deposited in each bank are also legislated. Third, there are constraints imposed by exogenous factors such as interest rates, minimum investment requirements and the naturation dates of investments. The study also found that local finance executives try to achieve some social responsibility through a careful manipulation of their jurisdiction's cash management techniques. Given these factors, public institutions can not achieve maximum levels of return on investment; they can only achieve satisficing returns. / Ph. D.

by Yu Ying Choi Alan Abel. / Bibliography: leaves 72-73 / Thesis (M.B.A.)--Chinese University of Hong Kong, 1985

In this study seventeen various relationships between yields of three-month, six-month, and twelve-month maturity negotiable CD's and U.S. Government T-Bills were analyzed to find a leading indicator of short-term interest rates. Each of the seventeen relationships was tested for correlation with actual three-, six-, and twelve-month yields from zero to twenty-six weeks in the future. Only one relationship was found to be significant as a leading indicator. This was the twelve-month yield minus the six-month yield adjusted for scale and accumulated where the result was positive. This indicator (variable nineteen in the study) was further tested for usefulness as a trend indicator by transforming it into a function consisting of +1 (when its slope was positive), 0 (when its slope was zero), and -1 (when its slope was negative). Stage II of the study consisted of constructing a computer-aided model employing variable nineteen as a forecasting device. The model accepts a week-by-week minimum cash balance forecast, and the past thirteen weeks' yields of three-, six-, and twelve-month CD's as input. The output of the model consists of a cash time availability schedule, a numerical listing of variable nineteen values, the thirteen-week history of three-, six-, and twelve-month CD yields, a plot of variable nineteen for the next thirteen weeks, and a suggested investment strategy for cash available for investment in the current period.

This research investigates the complementary value of a statement of cash flows (SCF) in a set of published financial statements. Selected accounting studies and selected parts of communication theory are used to argue the case for treating an SCF as a primary financial statement. Ideas adapted from communication theory are also used to decide key issues involved in developing an SCF. Specifically, the study selects a direct rather than a reconciling format for an SCF; it also defines cash to include currency, bank accounts, and marketable securities and exclude claims to cash such as notes and accounts receivable. The definition of cash limits cash flow to strict receipts and disbursements; it excludes constructive receipts and disbursements.

Thesis (MBA (Business Management))--University of Stellenbosch, 2008. / ENGLISH ABSTRACT: To date, there has been significant research completed on the topic of corporate financial distress. Two pioneering researchers in the field of predicting financial distress was Beaver in 1966 and Altman in 1968. More recent research, based on companies listed on the JSE has been that of Steyn-Bruwer and Hamman (2006). This project, based on the latter authors’ work, has been formulated with one main research objective and two subordinate research objectives. The main research objective is to prove that different modelling techniques provide better prediction accuracies than others. The two subordinate research objectives are firstly to prove that there is a difference in the overall predictive accuracy if the data (provided by Steyn-Bruwer and Hamman) is subdivided according to “year before failure” and not according to economic period and secondly to prove that more optimised, independent variables would provide a better overall predictive accuracy. This research report summarises several significant papers on the topic; and draws the conclusion that research on financial distress is fragmented with very little consensus on any of the major definitions, assumptions and findings. In order to contextualise these differences; this research report defines and discusses corporate financial distress and considers the major issues associated with the field of research. An interesting observation from the literature survey was the fact that existing literature does not readily take consideration of the number of Type I and Type II errors made. As such, this research report introduces a novel concept (not seen in other research) called the “Normalised Cost of Failure” (NCF) which takes cognisance of the fact that a Type I error typically costs 20 to 38 times that of a Type II error. In order to satisfy the main research objective several different modelling techniques were selected based on their popularity in the literature surveyed. They are: Multiple Discriminant Analysis (MDA), Recursive Partitioning (RP), Logit Analysis (LA) and Neural Networks (NN). A summary of each of the different techniques is provided in Chapter 4 of this research report. The research by Steyn-Bruwer and Hamman forms the departure point for this research and their work is summarised in Chapter 5 of this report. Chapters 6, 7 and 8 use the data from Steyn-Bruwer and Hamman along with the above mentioned modelling techniques to verify the main and subordinate objectives. In terms of the main research objective, the results of these chapters show that the different analysis techniques definitely produce different predictive accuracies. Here, the MDA and RP techniques correctly predict the most “failed” companies; and consequently have the lowest NCF. This research report also shows that LA and NN provide the best overall predictive accuracy. In terms of the first subordinate research objective; this research shows that using the year before failure rather than the economic period as a subdivision provides superior predictive accuracy. With regard to the second subordinate research objective: there is no difference in the predictive accuracies if the independent variables are further optimised. These results were disappointing and consequently disprove the second subordinate objective that widening the number of input variables actually improves the predictive accuracy. In fact, the results indicate that the information contained in the independent variables seems to saturate after the most important (key predictor) independent variables have been included in the model. It is important to take cognisance of the fact that each predictive technique has its own strength and weakness. It is proposed by the author that the strengths and weaknesses of these predictive techniques be combined to provide a better overall predictive methodology. / AFRIKAANSE OPSOMMING: Heelwat betekenisvolle navorsing oor die onderwerp van maatskappye se finansiële verknorsing is tot op hede voltooi. Twee baanbreker-navorsers op die gebied van vooruitskatting van finansiële verknorsing was Beaver in 1966 en Altman in 1968. Meer onlangse navorsing, gebaseer op maatskappye wat op die JSE genoteer is, was dié van Steyn-Bruwer en Hamman (2006). Hierdie navorsingsverslag, gebaseer op die voorgenoemde outeurs se werk, is geformuleer met een hoofnavorsingsdoelwit en twee ondergeskikte navorsingsdoelwitte. Die hoofnavorsingsdoelwit is om te bewys dat verskillende modelleringstegnieke beter voorspellingsakkuraatheid as andere het. Die twee ondergeskikte navorsingsdoelwitte is, eerstens, dat daar ʼn verskil is in die oorhoofse voorspellingsakkuraatheid as die data (verskaf deur Steyn-Bruwer en Hamman) onderverdeel word volgens die “jaar voor mislukking” eerder as volgens die ekonomiese tydperk; en tweedens, om te bewys dat meer geoptimiseerde, onafhanklike veranderlikes kan lei tot ʼn beter oorhoofse voorspellingsakkuraatheid. Ten einde hierdie verskille te konseptualiseer, het hierdie navorsingsverslag finansiële mislukkings van maatskappye bespreek en gedefinieer en aandag geskenk aan die belangrikste aspekte geassosieer met die navorsingsveld. ʼn Interessante waarneming uit die literatuurstudie was die feit dat die huidige literatuur selde indien enige, oorweging skenk aan die aantal Tipe I- en Tipe II-foute wat gemaak word. As sulks het hierdie navorsingsprojek ʼn nuwe begrip (nog nie in ander navorsing gesien nie) ontwikkel, wat beskryf word as die “Genormaliseerde Kostefaktor”; wat die feit dat ʼn Tipe I-fout tipies 20 tot 38 maal die koste van ʼn Tipe II-fout beloop, in ag neem. Ten einde te voldoen aan die hoofnavorsingsdoelwit is verskillende modelleringstegnieke wat op grond van hul gewildheid in die literatuur voorgekom het, gekies. Hulle is: Meervoudige Diskriminantanalise (MDA), Herhalende Verdeling (RP), Logit-Analise (LA) en Neurale Netwerke (NN). ʼn Opsomming van elk van hierdie verskillende tegnieke word in Hoofstuk 4 van hierdie navorsingsverslag verskaf. Die navorsing wat deur Steyn-Bruwer en Hamman gedoen is, vorm die vertrekpunt van hierdie navorsing en hulle werk is gevolglik in Hoofstuk 5 van hierdie verslag opgesom. Hoofstukke 6, 7 en 8 gebruik die data van Steyn-Bruwer en Hamman tesame met die bovermelde modelleringstegnieke ten einde die hoof- en ondergeskikte doelwitte te bewys. In terme van die hoofnavorsingsdoelwit, het die resultate van hierdie hoofstukke getoon dat die verskillende analitiese tegnieke definitief verskillende voorspellingsakkuraatheid oplewer. Hier het die MDA- en RP-tegnieke die grootste aantal mislukte maatskappye korrek voorspel, en gevolglik die laagste Genormaliseerde Kostefaktor gehad. Die navorsingsverslag toon ook dat LA en NN die beste oorhoofse akkuraatheid van voorspelling het. In terme van die eerste ondergeskikte navorsingsprobleem het hierdie navorsing getoon dat, om die jaar voor mislukking te gebruik as onderverdeling, eerder as die ekonomiese tydperk, beter voorspellingsakkuraatheid het. Wat die tweede ondergeskikte navorsingsdoelwit betref, is daar bevind dat daar geen verskille in die voorspellingsakkuraatheid bestaan as die individuele veranderlikes verder geoptimaliseer word nie. Hierdie resultate was teleurstellend en het gevolglik die tweede ondergeskikte probleem, naamlik dat as die aantal inset-veranderlikes sou vergroot word, dit die vooruitskattingsakkuraatheid behoort te kan verhoog, verkeerd bewys. Tewens, die resultate het getoon dat die inligting soos vervat in die onafhanklike veranderlikes klaarblyklik versadiging bereik nadat die belangrikste (hoof-vooruitskatter) onafhanklike veranderlikes in die model opgeneem is. Dit is belangrik om kennis te neem van die feit dat elke vooruitskattingstegniek sy eie sterk en swak punte het. Die skrywer stel dus voor dat hierdie sterk- en swakpunte gekombineerd gebruik word om ʼn beter oorhoofse vooruitskattingsmetodologie daar te stel.