EXCELLENT MASTER THESIS UTWENTE

EXCELLENT MASTER THESIS UTWENTE

They used a sample consisting of companies listed on the Athens Stock Exchange from the period of These comparisons will focus on the findings of the non-crisis period of this study, because only this period has been studied by other authors. The working capital cycle represents the time difference between the acquisition of raw materials and other inputs, and the receiving of cash from the sale of the finished goods. The Quarterly Journal of Economics 2. Other motives of extending Trade Credit Specific Investment in the Buyer-Seller Relationship Smith argued that if a supplier has a specialized and non-salvageable investment in a buyer, that this investment could be an important determinant for extending trade credit to this buyer. This research focusses solely on firms from The Netherlands, to truly understand the working capital management during crisis a much broader scope is needed. The regression analyses are only a snapshot of the short-term benefits and further research should study the long-term benefits of increasing the number of days accounts receivables by larger firms during crisis periods.

Nilsen argues that these cash rich firms use its cash reserve as a precaution, because they are financially constrained and are likely to have a more volatile demand, which they have to cope with. The trade-off of accepting account payables or not is illustrated in figure 1. It ended with the discussion of the literature concerning WCM policies. The result of table 4. Many authors like Shin and Soenen have argued that it is important for firms to shorten the CCC, as managers can create value for their shareholders by reducing the cycle to a reasonable minimum Sharma and Kumar, Also evidence is found for the motives of these suppliers for extending trade credit when they have a large interest in the survival of the customer and suppliers are able to liquidate the goods without much loss. Working capital is also called net working capital and is defined as current assets less current liabilities Hillier et al.

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Interactive forecasting univariate and multivariate methods.

A stronger negative effect is found by Raheman and Nasr who found a percentage of Journal of Financial and Quantitative Analysis, 9, pp. This means that when Indian firms increase their cash conversion cycle, profitability will be higher. Also evidence is found for the motives of these suppliers for extending trade credit when they have a large interest in the survival of the customer and suppliers are able to liquidate the goods without much loss.

In the upcoming analyses, each of these parts will be studied, with the aim of determining the most profitable way to manage each of these parts during a non-crisis and crisis period. All these studies have used regression analyses using different independent variables for profitability. In the second part of the paragraph an overview of the literature thdsis on the determinants of trade credit is given.

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The first is allowing a delay in payment and second is by giving a discount in payment, which can be seen as a price reduction. The regression analyses are tested to see if there is a presence of autocorrelation and multicollinearity in the data, using Durbin Watson D-W and Variance Inflation factor VIF statistics.

To increase the validity of this research, studies should include multiple crisis periods with different causes and implications. Remember me on this computer. For example a manufacturing firm has a lot more inventories compared to an employment agency. Empirical Evidence from Business Start-ups. International Review of Finance, Financial Review, 21 3p.

excellent master thesis utwente

As mentioned before, they also found evidence supporting the theory of price discrimination with firm with high profit margins. They used a panel data regression methodology, consisting of 8, SMEs covering the period The first is allowing a delay in payment and second is by giving a discount in payment, which can be seen as a price reduction.

Studies on working capital management The literature exceolent working capital and WCM uses various methods to explain and study its meanings and outcomes.

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These findings imply that managers can create shareholder value by shortening the CCC. But the mastdr widely used type of measurement is the natural logarithm of sales, which is used by Padachi et al. Since these are no average numbers, it could mean that throughout the middle of these crisis years firm indeed increase their accounts receivables.

excellent master thesis utwente

These results are on short-term basis. Sanchez University Java of Twente and Dr.

Journal of Political Economy, 78 2pp. Since these future sales are only enhancing the profitability of a firm in the near future, makes these positive relations very reasonable. The highest VIF score was 2. The direct costs are the cost of capital invested in each part of the cycle, for example interest on the debt finance to sustain trade creditors.

For robustness both these dependent variables will be used. The larger the seller is, the larger its customer base will be. They also found that there is no significant difference between small and larger firms, so both can enhance profit by shortening its cash conversion cycle. Firm Profitability There are many different measurements of firm profitability among the researchers who studied the relation between WCM and firm profitability.

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Other determinants of Inventory management Lieberman et al. The method that was used is the OLS regression analysis, in which the number of days accounts receivables, accounts payables, inventories and the cash conversion cycle are analysed. Technological factors, like longer setup and processing times increases the level of inventories.