research project on cash management

Click through the PLOS taxonomy to find articles in your field.

For more information about PLOS Subject Areas, click here .

Loading metrics

Open Access

Peer-reviewed

Research Article

Cash flow management and its effect on firm performance: Empirical evidence on non-financial firms of China

Roles Investigation

Affiliation School of Accounting, Xijing University, Xi’an City, Shaanxi Province, People’s Republic of China

Affiliation Department of Economics and Management Sciences, NED University of Engineering & Technology, Karachi City, Pakistan

* E-mail: [email protected]

Affiliation Department of Business and Economics, University of Almeria, Almería, Spain

• Fahmida Laghari, 
• Farhan Ahmed, 
• María de las Nieves López García

• Published: June 20, 2023
• https://doi.org/10.1371/journal.pone.0287135
• Reader Comments

The main purpose of this research is to investigate the impact of changes in cash flow measures and metrics on firm financial performance. The study uses generalized estimating equations (GEEs) methodology to analyze longitudinal data for sample of 20288 listed Chinese non-financial firms from the period 2018:q2-2020:q1. The main advantage of GEEs method over other estimation techniques is its ability to robustly estimate the variances of regression coefficients for data samples that display high correlation between repeated measurements. The findings of study show that the decline in cash flow measures and metrics bring significant positive improvements in the financial performance of firms. The empirical evidence suggests that performance improvement levers (i.e. cash flow measures and metrics) are more pronounced in low leverage firms, suggesting that changes in cash flow measures and metrics bring more positive changes in low leverage firms’ financial performance relatively to high leveraged firms. The results hold after mitigating endogeneity based on dynamic panel system generalized method of moments (GMM) and sensitivity analysis considering the robustness of main findings. The paper makes significant contribution to the literature related to cash flow management and working capital management. Since, this paper is among few to empirically study, how cash flow measures and metrics are related to firm performance from dynamic stand point especially from the context of Chinese non-financial firms.

Citation: Laghari F, Ahmed F, López García MdlN (2023) Cash flow management and its effect on firm performance: Empirical evidence on non-financial firms of China. PLoS ONE 18(6): e0287135. https://doi.org/10.1371/journal.pone.0287135

Editor: Chenguel Mohamed Bechir, Universite de Kairouan, TUNISIA

Received: February 23, 2023; Accepted: May 31, 2023; Published: June 20, 2023

Copyright: © 2023 Laghari et al. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Data Availability: The data used in this study is taken from China Stock Market and Accounting Research (CSMAR) database.

Funding: Funded studies the grant has been awarded to the author María de la Nieves López García from the grant PID2021-127836NB-I00 (Spanish Ministry of Science and Innovation and FEDER). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

Competing interests: The authors have declared that no competing interests exist.

Introduction

Firms’ efficient cash flow management is significant tool to enhance financial performance [ 1 , 2 ]. Exercising proper management of cash flow is vital to the persistence of business [ 3 ]. Cash flow management is primarily concerned with identifying effective policies that balance customer satisfaction and service costs [ 4 ]. Firms manage efficiently of cash flows via working capital by balancing liquidity and profitability [ 5 – 7 ]. Working capital management, which is the main source of firm cash flow has significant importance in the context of China, where firms are restricted with limited access to external capital markets. In order to fulfill their cash flow needs firms heavily depend on internal funds, short-term bank loans, and trade credit in order to finance their undertakings [ 5 ]. For such firms’ working capital plays the role of additional source of finance. Consistent with this view, KPMG China [ 8 ] declared that effective management of working capital has played a vital role to alleviate the effects of recent financial crisis. Additionally, in recent times the remarkable growth of China roots to Chinese private firms’ effective management of working capital in general and their accounts receivables in particular [ 9 ]. Therefore, efficient management of working capital is an avenue that highly influence firm profitability [ 10 – 12 ], liquidity [ 7 , 13 ], and value. Since corporates cash flow management policies settle working capital by account receivables, inventories and accounts payables. Hence, existing theories of working capital management support the view that by cash flow manipulation firms can enhance liquidity and competitive positioning [ 6 , 14 , 15 ]. Therefore, firms manipulate cash flows through its measures, as by way speedy recovery of accounts receivables, reducing inventories, and delaying accounts payables [ 16 ]. Hence, the first research question is whether changes in cash flow measures are the tools that could bring positive changes in firm financial performance.

From the accounting perspective, liquidity management evaluates firm’s competence to cover obligations with cash flows [ 17 , 18 ], as uncertainty about cash flow increases the risk of collapse in most regions, industries, and other subsamples [ 19 ]. There are two extents: static or dynamic views, through which corporate liquidity can be inspected. The balance sheet data at some given point of time is a basis for static view. This comprises of traditional ratios such as, current ratios and quick ratios, in order to evaluate firms ability to fulfill its obligations through assets liquidation [ 20 ]. The static approach is commonly used to measure corporate liquidity, however, authors also declare that financial ratio’s static nature put off their capability to effectively measure liquidity [ 21 , 22 ]. The dynamic view is to be utilized to capture the firms’ ongoing liquidity from firm operations [ 16 , 21 ]. Therefore as a dynamic measure, the cash conversion cycle (CCC) is used by authors to measure liquidity in empirical studies of corporate performance [ 23 ]. For instance; Zeidan and Shapir [ 24 ] and Amponsah-Kwatiah and Asiamah [ 25 ] find that reducing the CCC by not affecting the sales and operating margin increases share price, profits and free cash flow to equity. Accordingly, Farris and Hutchison [ 20 ] find that shorter cash conversion cycle leads to higher present value of net cash flows generated by asset which contribute to higher firm value. Moreover, Kroes and Manikas [ 1 ] used operating cash cycle as a measure for cash flow metrics, which combines accounts receivables and firm inventory. As explained by Churchill and Mullins [ 26 ] that all other things being constant shorter the operating cash cycle faster the company can reassign its cash and can have growth from its internal resources. The second research question therefore is that whether changes in cash flow metrics bring positive improvements in firm financial performance.

Study uses CSMAR database of Chinese listed companies from the period 2018:q2-2020:q1. In the study, measure of firm performance is Tobin’s-q. Study uses three cash flow measures; accounts receivables turning days, inventory turning days and accounts payable turning days, and cash conversion cycle and operating cash cycle as measure for cash flow metrics. Consistent with the prediction, study finds that changes in cash flow measures and metrics bring positive improvements in firm financial performance. In particular decline in cash flow measures (ARTD, ITD, and APTD) to one unit would increase firm performance approximately 6.8%, 0.03%, and 7.2%; respectively. Additionally, one unit decline in cash conversion cycle would increase firm performance approximately 3.8%. Furthermore, study uses GMM estimator to alleviate the endogeneity and observe that the main estimation results still hold. In addition, study also employs a sensitivity analysis specifications to better isolate the impact of changes in cash flow measures and metrics on firm financial performance in previous period and observe that negative association is still sustained.

The sizable number of listed firms in China enable the study to divide sample into two subsamples: firms in high leverage industry and firms in low leverage industry. The study repeats the test on these two subsamples. Significant and negative association between cash flow measures, metrics and firm financial performance is still sustained. Moreover, the results of differential coefficients across two sub samples via seemingly unrelated regression (SUR) systems indicated that cash flow measures and metrics are more pronounced in low debt industries.

The paper makes significant contribution to the literature related to cash flow management and working capital management. First, this paper is among few to empirically study, how cash flow measures and metrics are related to firm performance from dynamic stand point especially in the Chinese context. The study sheds light on the role of cash flow management in improving the firm’s financial performance. Second, extant researches on cash flow management focus on the manufacturing industries. Unlike others this paper investigates the relation between cash flow measures, metrics and firm performance in the context of whole Chinese market, which is essential to know how these performance levers contribute to financial performance of other industries also. Third, results highlight the role of cash flow management in improving financial performance by taking firms’ leverage into consideration and declare that low leveraged industries are better off in terms of influence of changes in cash flow measures and metrics on firm performance. Fourth, the present paper uses generalized estimating equations (GEEs) Zeger and Liang [ 27 ] technique which is robust to estimate variances of regression coefficients for data samples that display high correlation between repeated measurements. Finally, to ensure robustness of findings the study uses sensitivity analysis, and in order to control for the potential issue of endogeneity the present study also uses generalized method of moments (GMM) following statistical procedures of Arellano and Bover [ 28 ] and Blundell and Bond [ 29 ].

The remainder of the paper is organized as follows. Section two discusses the role of cash flow management in China. Section three discusses the relevant literature, theoretical framework and development of hypotheses. Section four presents the data and variables of the study. Section five reports the methodology, empirical results and discussions. Section six concludes the paper.

Cash flow management in China

The economy of China has undergone a massive economic growth rates followed by high rates of fixed investment in the past three decades [ 5 , 30 ]. This growth miracle is outcome of highly productive firms and their ability to accrue significant cash flows [ 31 ], despite inadequate financial system. Moreover, although Chinese economy has seen fast growth and development in the past two decades but still the legal environment in China cannot be regarded as conducive [ 32 , 33 ]. As, in the credit market of China government plays a decisive role in credit distribution [ 34 , 35 ], and mostly the credit is granted to companies owned by state or closely held firms [ 34 , 36 ]. The Chinese firms have restricted admittance to the long-standing funds marketplace [ 37 ], therefore, companies held private or non-SOE find difficulty to access credit from financial market relatively to state owned firms. Although by the 1998 leading Chinese banks were authorized to lend credit to privately held firms but still these firms face troublesome to get external finance comparatively to state owned firms [ 32 ]. The prior literature also indorses this and states that with the presence of regulatory discrimination amid privately held and state owned firms, the privately held firms to the extent are often the subject of state predation [ 38 , 39 ].

Given country’s poor financial system, firms in China have managed their growth rates from their internal resources. Working capital management from where firms manage cash flows is the source of financing of the growth by Chinese firms. Accordingly, Ding et al . [ 5 ] mentioned that in their sample of Chinese firms about 66.6% dataset were characterized by a large average ratio of working capital to fixed capital, as it is a source and use of short term credit. Additionally, Dewing [ 40 ] termed working capital as one of the vital elements of the firm along with fixed capital. Moreover, Ding et al . [ 5 ] conclude that in the presence of financial constraints and cash flow shocks still Chinese firms can manage high fixed investment levels which correspond more to working capital than fixed capital. They further state that this all roots to the efficient management of working capital that Chinese firms use in order to mitigate liquidity constraints.

Literature review, theoretical background and hypothesis development

Literature review and theoretical background.

Corporate finance theory states that the main goal of a corporation is to maximize shareholder wealth [ 41 ]. Neoclassical capital theory is based on the proposition put forward by Irving Fisher [ 42 ] that individual consumption decisions can be separated from investment decisions. Fisher’s separation theorem holds true in perfect capital markets, where companies and investors can lend and borrow on the same terms without incurring transaction costs. In such a world, the choice to change income streams by lending and borrowing to meet preferences of consumption means that investors rank income streams according to their present value. Therefore, the value of the company is maximized by choosing the set of investments that generate the largest net present value over returns. When the company pays cash dividends with capital reserves, cash dividends can be maintained at a certain level, and when the ratio of capital reserves to cash dividends is high, accrual income management is low [ 43 ]. Since Gitman’s [ 44 ] seminal work, in which he introduced the concept of cash circulation as a means of managing corporate working capital and its impact on firm liquidity. Richards and Laughlin [ 16 ] then transformed the cash cycle concept into the Cash Conversion Cycle (CCC) theory for analyzing the working capital management efficiency of firms. CCC theory holds that effective working capital management (i.e., shorter cash conversion cycles) will increase a company’s liquidity, all else being equal. Signal theory can illustrate how a company can provide excellent signals to users of financial and non-financial statements [ 45 ]. In addition, this theory can also be used as a reference for investors to see how good or bad a company is as an investment fund. This theory explains the relationship between working capital turnover and profitability.

The trade-off theory in capital structure is a balance of benefits and sacrifices that may occur due to the use of debt [ 46 ]. The higher the amount a company spends on financing its debt, the greater the risk that they will face financial hardship due to excessive fixed interest payments to debt holders each year and uncertain net income. Higher cash flow uncertainty leads to an increased risk of business collapse [ 19 ]. Companies with high levels of leverage should keep their liquid assets high, as leverage increases the likelihood of financial distress. This theory is used to explain the relationship between leverage and profitability. Pecking order theory explains that companies with high liquidity levels will use more debt funds than companies with low liquidity levels [ 47 ]. Liquidity measures a company’s ability to meet its cash needs to pay short-term debts and fund day-to-day operations as working capital. The better the company’s current ratio, the more the company will gain the trust of creditors so that creditors will not hesitate to lend the company funds used to increase capital, which will benefit the company.

Prevailing working capital management theories argue that firms can improve their competitive position by manipulating cash flow to improve liquidity [ 14 , 15 , 20 , 48 – 50 ]. In addition, the company’s ability to convert materials into cash from sales reflects the company’s ability to effectively generate returns from investments [ 51 ]. It’s better to combine investment spending with cash flow from ongoing operations than to measure and report both discretely [ 52 ]. Three factors directly affect the company’s access to cash: (i) the company’s inability to obtain cash receivables while waiting for the customer to pay for the delivered goods; (ii) the company is unable to obtain cash receivables; (iii) the company is unable to obtain cash receivables. (ii) Cash invested in goods is tied up and unavailable and the goods are inventoried; and (iii) cash may be made to the company if it chooses to delay payment to suppliers for goods or services provided [ 16 ]. While a company’s cash payments and collections are typically managed by the company’s finance department, the three factors that affect cash flow are primarily manipulated by operational decisions [ 53 ].

In the literature, the prevailing view is that the presence of liquidity is not always good for the company and its performance, because sometimes liquidity can be overinvested. Since emerging markets are characterized by imperfect markets, companies maintain internal resources in the form of liquidity to meet their obligations. As in emerging markets, financial markets are inefficient in allocating resources and releasing financial constraints, resulting in underinvestment by financially constrained companies [ 54 ]. In addition, access to capital markets, external financing costs, and availability of internal financing are financial factors on which a company’s investments rely [ 55 ]. Alternatively, the pecking order theory [ 56 ] argues that due to information asymmetry, companies adopt a hierarchical order of financing preferences, so internal financing takes precedence over external financing. A study by Zimon and Tarighi [ 7 ] argue that businesses must use the right working capital strategy to achieve sustainable growth as it optimizes operating costs and maintains financial liquidity. Moreover, asset acquirements affect a company’s output and performance [ 57 ].

The existing literature provides different evidence of the impact of working capital management on firm performance. A study by Sharma and Kumar [ 58 ] examine the relationship between working capital management and corporate performance in Indian firms. Considering a sample of 263 listed companies during the period 2000–2008, they found that CCC had a positive impact on ROA. Similarly, of the 52 Jordanian listed companies in the period 2000–2008, Abuzayed [ 11 ] found a positive impact of CCC on total operating profit and Tobin’s-Q. Similar findings have been reported by companies in China [ 59 ], the Czech Republic [ 60 ], Ghana [ 25 ], Indonesia [ 6 ], Spain [ 61 ], and Visegrad Group countries [ 62 ]. In contrast, few studies reported an inverse correlation between CCC and firm performance in India [ 63 ], Malaysia [ 2 ], and Vietnam [ 64 ]. A negative correlation indicates that a higher CCC leads to lower company performance. A study by Afrifa et al. [ 65 ] did not find any significant relationship between CCC and firm performance. The findings of the relationship between NWC and company performance are not much different from CCC. Companies in European countries [ 66 ], and the United Kingdom [ 67 ] reported positive correlations, and those in Poland reported negative correlations [ 68 ]. Although previous operations management studies have explored the relationship between working capital and firm performance, the results of these studies remain inconclusive, and the study has found positive, curved, and even insignificant relationships. This is mainly since accidental factors make this relationship both complex and special. Therefore, to enhance the beneficial impact of working capital and cash flow on corporate performance, companies must make appropriate investments to promote more objective, informed, and business-specific working capital and cash flow management choices [ 69 ]. Collectively, these mixed pieces of evidence provide sufficient motivation for this study to develop hypotheses based on positive and negative relationships.

The cash flow measures and firm financial performance

The firms’ trade where merchandise sold on credit instead of calling for instantaneous cash imbursement, such transaction generate accounts receivables [ 70 ]. Accounts receivable directly affect the liquidity of the enterprise, and thus the efficiency of the enterprise [ 71 ]. From the stands of a seller, the investment in accounts receivables is a substantial component in the firm’s balance sheet. Firms’ progressive approach towards significant investment in accounts receivables with respect to choice of policies for credit management contributes significantly to enhance firm value [ 72 ]. Firms can utilize cash received from customers by investing in activities which contribute to enhance sales [ 1 ]. Firms can improve liquidity position with capability to collect overheads from customers for supplied goods and services rendered in a timely manner [ 17 ]. However, credit sales is instrumental to increase sales opportunities for firms but may also increase collection risk which can lead to cash flow stresses even to healthy sales growth companies [ 73 ]. Firms offer sales discounts which may not increase sales but may increase payments by customers and improve firms’ cash flow, reduce uncertainty of future cash flows, reduce risk and required rate of return [ 74 ].

Literature suggests that firm performance increases with shorter period of day’s sales outstanding [ 15 , 20 , 26 ]. Accordingly, Deloof [ 75 ] by working on Belgians firms find negative relationship between number of days accounts receivables and gross operating income. However, models of trade credit (such as; Emery, [ 21 ]) endorse that higher profits also lead to more accounts receivables as firms with higher profits are rich in cash to lend to customers. In a study by García-Teruel and Martinez- Solano [ 76 ] suggest that managers of firms with fewer external financial resources available generally dependent on short term finance and particularly on trade credit that can create value by shortening the days sales outstanding. Furthermore, Gill et al . [ 10 ] declare that firm can create value and increase profitability by reducing the credit period given to customers. Kroes and Manikas [ 1 ] analyzed manufacturing firms and suggested that decline in days of sales outstanding relates to improvements in firm financial performance and persists to several quarters. According to Moran [ 77 ] suppliers happily offer reasonable sales discounts for early payments which improve their cash flow position, locks the receivables, remove the bad debt risk at early stage, and reduce their day’s sales outstanding significantly which ultimately improve their working capital position. Fig 1 depicts this relationship. In consistent with discussion the following hypothesis is proposed:

• H1a : A decrease (increase) in the duration of accounts receivables turning days increases (decreases) firm financial performance.

• PPT PowerPoint slide
• PNG larger image
• TIFF original image

https://doi.org/10.1371/journal.pone.0287135.g001

The research has mixed views whether reduction in inventory is beneficial to firm performance or increase in inventory leads to increased performance. Despite high cash flow, inventory level management has been neglected [ 78 ]. In this regard literature has evidenced three themes of relationships: positive relationship, negative relationship or no relationship, and inclusion of moderators and mediators to the relationship of number of day’s inventory and firm performance [ 79 ]. However, the inventory management revolutionized after the launch of lean system with familiarizing just-in-time inventory philosophy by Japanese companies [ 80 , 81 ]. Afterwards, research related to inventory management evidenced that firms which adopted lean system not only improved customer satisfaction but also attained greater level of asset employment that ultimately leads to higher organizational growth, profitability, and market share [ 82 , 83 ]. Moreover, in a JIT context firms experience positive effects on organizational performance due to reduced inventory, and reduction in inventory significantly improves three performance measures such as: profits, firms return on sales, and return on investments [ 84 ]. Additionally, Fullerton and McWatters [ 85 ] found positive influence of reduced inventory on organizational performance which corresponds to JIT context.

However, generally literature considers that better inventory performance such as: higher inventory turns or decreased level of inventory is normally attributed to better firm financial performance [ 86 ]. Moreover, it is a mutual consent by researchers that high level of inventory also signifies demand and supply misalliance and often related to poor operational performance [ 87 , 88 ]. In a study by Elsayed and Wahba [ 79 ] indicated that there is influence of organizational life cycle on the relationship of inventory and organizational performance. Their results indicated that at initial stage though ratio of inventory to sales negatively affects organizational performance, but it put forth significant and positive coefficient on organizational performance at the revival phase or rapid growth phase. Additionally, literature has documented negative influence of reduced inventory on performance. In a study by Obermaier and Donhauser [ 89 ] evidenced that lowest level of inventory leads to poor organizational performance and suggest that moving towards zero inventory case is not always favorable. Fig 1 depicts this relationship. Accordingly the hypothesis is proposed as follows:

• H1b : A decrease (increase) in the duration of inventory turning days increases (decreases) firm financial performance.

According to Deloof [ 75 ] payment delays to suppliers are beneficial to assess the quality of product bought, and can serve as a low-cost and flexible basis of financing for the firm. On the contrary, delaying payments to suppliers may also prove to be costly affair if firm misses the discount for early payments offered [ 90 ], hence firms by reducing days payable outstanding (DPO) likely to enhance firm financial performance [ 76 ]. In line with this, Soenen [ 22 ] states that firms try to collect cash inflows as quickly as possible and delay outflows to possible length. Payment delays enable firms to hold cash for longer duration which ultimately increases firms’ liquidity [ 50 ]. As discussed by Farris and Hutchsion [ 20 ] that firms can improve cash to cash cycle by extending the average accounts payable along with inventory and get interest free financing. A study by Sandoval et al . [ 91 ] speculate that investors are more sensitive to accruals of long-term operating assets than to accruals of long-term operating liabilities because the former is more associated with recurring profits than the latter. Moreover, Fawcett et al . [ 92 ] indorsed that by extending the duration of accounts payable cycle companies can improve their cash to cash cycle. However, longer payment cycles not only harm relationship with suppliers, but may also lead to lower level of services from suppliers [ 93 ].

As discussed by Raghavan and Mishra [ 94 ] firms may be reluctant to produce or order at optimal point followed by cash restraints for fast growing firms where money plays the role of catalyst when demand is significantly high but firms are financially restricted to order less and this situation may mark the harmful effects over the performance of whole supply chain at least on temporary basis until restored. Hence, this situation is favoring that firms encourage and motivate their customers for quicker payments in order to increase cash to cash cycles [ 92 ]. Fig 1 depicts this relationship. Accordingly based on discussion hypothesis is proposed as follows:

• H1c : A decrease (increase) in the duration of accounts payable turning days’ increases (decreases) firm financial performance.

The cash flow metrics and firm financial performance

As shown by Richards and Laughlin [ 16 ] that firms should collect inflows as quickly as possible and postpone cash outflows as long as possible which is a general view based on the concepts of operating cash cycle (OCC) and cash conversion cycle (CCC). This shows that firms by reducing CCC cycle can make internal operation more efficient that ensures the availability of net cash flows, which in turn depicts a more liquid situation of the firm, or vice versa [ 25 ]. They further said that cash conversion cycle (CCC) is based on accrual accounting and linked to firm valuation. Baños-Caballero et al . [ 95 ] suggested that however, higher level of CCC increases firm sales and ultimately profitability, but may have opportunity cost because firms must forgo other potential investments in order to maintain that level. On the contrary, longer duration of CCC may hinder firms to be profitable because this is how firms’ duration of average accounts receivables and inventory turnover increase which may lead firms towards decline in profitability [ 96 ]. Therefore, cash conversion cycle (CCC) can be reduced by shortening accounts receivables period and inventory turnover with prolonged supplier credit terms which ultimately enable firms to experience higher profitability [ 97 , 98 ]. A shorter duration of CCC helps managers to reduce some unproductive assets’ holdings such as; marketable securities and cash [ 23 ]. Because with low level of CCC firms can conserve the debt capacity of firm which enable to borrow less short term assets in order to fulfill liquidity. Therefore, shorter CCC is beneficial for firms that not only corresponds to higher present value of net cash flows from firm assets but also corresponds to better firm performance [ 60 , 62 ].

Operating cash cycle is a time duration where firm’s cash is engaged in working capital prior cash recovery when customers make payments for sold goods and services rendered [ 16 , 26 ]. Literature endorses that shorter the operating cash cycle better the firm liquidity and financial performance because companies can quickly reassign cash and cultivate from internal sources [ 16 ]. In a study by Kroes and Manikas [ 1 ] find that there is significant negative relationship between changes in OCC with changes in firm financial performance. They further suggested that OCC can be taken by managers as a metric to monitor firm performance and can be used as lever to manipulate in order to improve firm performance. A study by Farshadfar and Monem [ 99 ] also found that when the company’s operating cash cycle is shorter and the company is small, the cash flow component improves earnings forecasting power better than the accrual component. Moreover, Nobanee and Al Hajjar [ 100 ] recommend the optimum operating cycle as a more accurate and complete working capital management measure to maximize the company’s sales, profitability, and market value. Fig 1 depicts this relationship. Hence, based on above discussion the proposed hypotheses are:

• H2a : A decrease (increase) in cash conversion cycle increases (decreases) firm financial performance.
• H2b : A decrease (increase) in operating cash cycle increases (decreases) firm financial performance.

Data and variables

Samples selection.

The data used in this study is taken from China Stock Market and Accounting Research (CSMAR) database. The study includes quarterly panel data of non-financial firms with A-shares listed on Shanghai Stock Exchange (SHSE) and Shenzhen Stock Exchange (SZSE). The data comprises on eight quarters ranging from 2018:q2-2020:q1, and four lag effects are included that make data up to twelve quarters. The use of quarterly data ensures greater granularity in the findings of the study as prior studies have mainly used annual data, therefore, this study uses two years plus one year of lagged data which offers exclusively a robust sample period that is instrumental to effective inference [ 1 ]. The main benefit of this method of examining quarterly changes within a company is that the company cannot have any missing data items throughout the sample period. Because any missing data will lead to design errors and imbalance panel data. Therefore, this problem led to now selection of a 12-quarter observation frame (two years plus one year of lagging data) because it delivers a reliable sample period from which effective conclusions can be prepared. Moreover, the data is further refined and maintained from unobserved factors, unbalanced panels, and calculation biases. Moreover, deleted firm-year observation with missing values; excluded all financial firms; as their operating, investing, and financing activities are different from non-final firms [ 75 , 101 ], eliminated firms with traded period less than one year, and excluded all firms with less than zero equity. The data is further winsorized up to one percent tail in order to mitigate potential influence of outliers [ 76 ]. Additionally, the firms’ data with negative values for instance; sales and fixed assets is also removed [ 67 , 101 ]. The final sample left with balanced panel of 20288 firm year observations consists of 2536 groups. The change (Δ) in all dependent and independent variables of the study sample represents variable period t measured as difference between value at the end of current quarter and value of the variable at the end of prior quarter divided by value of the variable at the end of prior quarter.

Dependent variable

The firm’s financial performance is dependent variable in the study and is measured through Tobin’s-q. Tobin’s-q is the ratio of firm’s market value to its assets replacement value and it is widely used indictor for firm performance [ 1 , 102 – 105 ]. Tobin’s-q diminishes most of the shortcomings inherent in accounting profitability ratios as accounting practices influence accounting profit ratios and valuation of capital market applicably integrates firm risk and diminishes any distortion presented by tax laws and accounting settlements [ 106 ]. Moreover, this variable has preference over other accounting measures (such as; ROA) as an indicator of relative firm performance [ 107 ].

Independent variables

Based on established literature [ 1 , 5 , 12 , 75 , 76 ] this study has used three cash flow measures and two composite metrics as independent variables. Each one of them is discussed below.

Accounts receivables turning days (ARTD).

The increasing days of sales outstanding specifies that firm is not handling its working capital efficiently, because it takes longer duration to collect its payments, which signifies that firm may be short of cash to finance its short term obligations due to the longer duration of cash cycle [ 5 ].

Inventory turning days (ITD).

A higher ratio of inventory turnover is a good sign for firm as it signifies that firm is not having too many products in idle condition on shelves [ 5 ].

Accounts payable turning days (APTD).

A firm with higher days of payable outstanding ratio shows that it takes longer duration to make payments to suppliers which is a sign of poor efficiency of working capital, however longer duration of DPO also signifies that company has good terms with suppliers which is also beneficial [ 5 ].

Cash conversion cycle (CCC).

It is generally considered that lower the CCC cycle better the firm efficiency and able to accomplish its working capital [ 5 ]. Additionally, longer duration of CCC shows more time duration between cash outlay and recovery of cash [ 76 ].

Operating cash cycle does not take into account the payables, and hence comprises of days where cash is detained as inventory prior receipts of payments from customer [ 1 ]. Besides, generally it is considered that firm having shorter OCC is with better liquidity and performance [ 26 ].

Control variables

This study uses firm size and return on assets as control variables. Following Deloof [ 75 ] the study uses firm size by taking natural logarithm of quarterly sales. The firm size has significant impact on market value of firms [ 103 , 108 ]. Study uses quarterly sales instead of total assets as measure for firm size to avoid the potential multicollinearity problem because total asset is denominator for the dependent variable [ 1 ]. Following Baños-Caballero et al . [ 95 ] study controls for return on asset (ROA) which is accounting measure of firms. Return on assets (ROA) is a ratio of earnings before interest and taxes (EBIT) divided by total assets [ 109 ].

Descriptive statistics

Table 1 shows the descriptive statistics of variables of the study. The mean and median value of ARTD is 92.89 and 73.14, respectively. On average, the firms in our sample have relatively higher median value of days of sales outstanding than evidence of Ding et al . [ 5 ], which shows that Chinese firms take longer to collect their payments from customers. The mean and median value of APTD is 105 and 82.25, respectively. The mean and median value of ITD is 166.18 and 107.13, respectively. On average it shows relatively high inventory turnover in our sample firms which signifies that Chinese firms are quite efficient in inventory management and products are not sitting idle in shelves. The mean and median value of CCC is 150.62 and 115.30, respectively. On average the CCC of Chinese firms is relatively high. However, in a study by Hill et al . [ 101 ] indicated that higher CCC also signifies higher firm profitability. The mean and median value of OCC is 250.71 and 206.44, respectively. The firm performance (Tobins-q) has a mean and median value of 2.86 and 2.27. The ROA shows mean and median value of 2.46 and 1.67, respectively. On average the size of Chinese firms is 20.79 with median value of 20.71.

https://doi.org/10.1371/journal.pone.0287135.t001

The Table 2 reports results for correlation matrix. The correlation coefficient between Tobin’s-Q and CCC is significant and negative at 1 percent level which is consistent to the findings of Afrifa [ 67 ]. The correlation between all the measures of cash flows and ROA is significant and negative at 1 percent, consistent with the results of Deloof [ 75 ]. Moreover the correlation between ROA and CCC is also significant and negative at 1 percent, similar evidences find by García-Teruel and Martinez-Solano [ 76 ] for the sample of Spanish firms. Furthermore, the correlation coefficients among all the variables are significantly lower than 0.80 indicating no sign of multicollinearity [ 110 ]. The formal test of variance inflation factor (VIF) for all the independent variables of study were examined to check if there is presence of multicollinearity. The variance inflation factor (VIF) also indicated no multicollinearity among analysis variables with all values below the threshold level of 10 proposed by Field [ 110 ], which shows that multicollinearity may not be the case and data is suitable for further analysis.

https://doi.org/10.1371/journal.pone.0287135.t002

Methodology, empirical analysis and discussion

Effect of cash flow measures on firm financial performance.

Where ΔY it represents Tobin’s-q for industry i and time t. The ΔX 1it is accounts receivable turning days (ΔARTD), and ΔX 1it-1 to ΔX 1it-4 are lags for ΔARTD. The ΔX 2it is inventory turning days (ΔITD), and ΔX 2it-1 to ΔX 2it-4 are lags for ΔITD. The ΔX 3it is accounts payable turning days (ΔAPTD), and ΔX 3it-1 to ΔX 3it-4 are lags for ΔAPTD. The CONTROLS it represent control variables; Size and ROA. The U it is probabilistic term. Study included four lag effects in Eq 6 for cash flow measures to examine how long the impact of changes in cash flow measures on changes in firm performance persists.

Table 3 provides detailed results of GEEs model’s parameters estimation analysis. The dependent variable is firm performance (Tobin’s-q) in all the models columns 2 through 4. H1a , H1b , and H1c posits that changes in measures of cash flow (ΔARTD, ΔITD, and ΔAPTD) changes firm financial performance. The coefficient of accounts receivable turning days (ΔARTD) in model 1 is -0.0068297, which is statistically significant at 0.1% confidence level in the current quarter. It is consistent with the study’s argument that decline in firms’ days of accounts receivables increases firm financial performance. Similar evidences were found by Shin and Soenen [ 13 ], Wilner [ 114 ], Deloof [ 75 ], and Kroes and Manikas [ 1 ]. According to Deloof [ 75 ] the negative relationship between days sales outstanding and firm performance suggests that managers can create value for their shareholders by reducing number of day’s accounts receivables to a reasonable minimum.

https://doi.org/10.1371/journal.pone.0287135.t003

The coefficient of inventory turning days (ΔITD) in model 1 is -0.0003014, which is statistically significant at 0.1% confidence level in the current quarter. These results are consistent with the argument given in hypothesis H1b . Significant number of studies conclude that low inventory period increases liquidity and firm performance [ 75 , 86 , 115 , 116 ]. Moreover, this finding is consistent with literature as firms sound inventory position exhibits better operational and financial performance [ 117 , 118 ].

The coefficient of accounts payable turning days (ΔAPTD) in model 1 is -0.0717425, which is statistically significant at 0.1% confidence level in the current quarter. These results are consistent with present study’s argument that decline in accounts payable turning days brings positive improvements in firm performance. The findings of results for APTD present strong evidence that when companies reduce their APTD by taking advantage of early discounts payment from suppliers, firms may have a persistent duration of perpetual firm financial performance improvement. As suggested by Moran [ 77 ] that firms may be more beneficial by taking advantage of early payment discounts than prolonging the cycle because of reduction in purchase price of components and materials by them.

Next, study estimated Eq 6 by dividing the sample into two subsamples based on firm leverage level, which is measured by firms’ debt to assets ratio. The high leverage (low leverage) contains firms in industries where their debt to assets ratio is greater (smaller) than the median value. Model 2 and 3 obtain similar patterns when applied on Eq (6) for high and low leveraged firms. The findings of results for high leverage and low leverage firms still hold as of full sample firms and strongly support hypotheses H1a , H1b , and H1c . Conclusively, the findings of results imply that reduction in three cash flow measures (ARTD, ITD, and APTD) relate to significant positive improvements in financial performance of firms at current quarter.

Effect of cash flow metrics on firm financial performance

Where ΔY it represents Tobin’s-q for industry i and time t. The ΔX it is ΔCCC and from ΔX 1it-1 to ΔX 1it-4 are lags for ΔCCC. The ΔX 2it is OCC and from ΔX 2it-1 to ΔX 2it-4 are lags for ΔOCC. The CONTROLS it shows the control variables; Size and ROA. The U it is probabilistic term. Study includes four lag effects in Eq 7 for cash flow metrics to examine how long the impact of changes in CCC and OCC on changes in firm performance persists.

Table 4 represents results for cash flow metrics (CCC and OCC). H2a and H2b predict that changes in ΔCCC and ΔOCC bring positive changes in the firm financial performance. The coefficient for the cash conversion cycle (ΔCCC) is -0.0382176, which is statistically significant at a 5% confidence level in the current quarter (as shown in Table 4 column 2).

https://doi.org/10.1371/journal.pone.0287135.t004

Next, the study estimated Eq 7 by dividing the sample into two subsamples based on firm leverage level which is measured by firms’ debt to assets ratio. The results in Table 4 Column 3 posit findings for highly leveraged firms. The coefficient for ΔCCC is -0.4038345, which is statistically significant at a 1% confidence level in the current quarter, as shown in Table 4 Column 3. The coefficient for ΔOCC is -0.0572725, which is statistically significant at a 1% confidence level in the current quarter, as shown in Table 4 Column 3. The coefficient for ΔCCC is -0.027272, which is statistically significant at a 0.1% confidence level, as shown in Table 4 column 4 for low-leverage firms at the current quarter.

As predicted by the hypothesis H2a ; the findings of results also show significant negative association of CCC with firm financial performance at current quarter for full sample firms, high leveraged firms, and low leveraged firms. These evidences of results are consistent with existing literature and show that decline in cash conversion cycle brings positive improvements in firm financial performance [ 13 , 23 , 75 , 76 , 96 , 97 , 119 ]. A study by Zeidan and Shapir [ 24 ] finds that reducing the CCC by not affecting the sales and operating margin increases the prices of shares, profits, and free cash flow to equity. Moreover, Prior research view that careful handling of the cash conversion cycle leads firms to significantly higher returns [ 13 , 23 , 75 , 76 , 97 ]. This outcome is consistent with the research by Simon et al. [ 120 ], Soukhakian and Khodakarami [ 121 ], Basyith et al. [ 6 ], Yousaf et al. [ 60 ], and Bashir and Regupathi [ 2 ]. The findings of the results show a significant negative association of OCC with firm financial performance in the current quarter for highly leveraged firms. The findings suggest that change in OCC led to changes in corporate performance provides significant support to the use of OCC as an indicator for managers to monitor performance and as a lever to manipulate to improve the corporate financial performance. The findings show that OCC in the current quarter posits a significant negative relationship with firm financial performance for highly leveraged firms. This evidence is consistent with the empirical findings of Churchill and Mullins [ 26 ].

Difference of coefficients across high leverage and low leverage firms

In addition, in the next section the present study analyzed the difference of coefficients across two groups by dividing sample into two subsamples, high leveraged and low leveraged firms based on their total debt to total assets ratios. In order to check the difference of coefficients across two groups study applied seemingly unrelated regression (SUR) system on Eqs ( 6 ) and ( 7 ) to better isolate the effect of cash flow measures and metrics on firm financial performance. The study computed standard errors for differenced coefficients via the seemingly unrelated regression (SUR) system that combines two groups.

The Table 5 reports results for differential impact of cash flow measures and metrics on firm performance across high leverage and low leverage industries. The study finds that the estimated coefficients for differences are positive and statistically significant. These findings of results imply that low leveraged industries are better off in terms of changes in cash flow measures and metrics that bring more positive changes in low debt industries financial performance. Since, low cash conversion cycle (CCC) conserves the debt capacity of the firm as in this situation firms need less short term borrowing to provide liquidity [ 97 ]. Therefore, lower cash conversion cycle (CCC) lessens the requirement for lines of credit and contributes to the firms’ debt capacity [ 23 ]. Due to high financial distress and higher likelihood of bankruptcy high leverage firms are more bounded by financial constraints which may hinder them to take valuable investments and, thus, harm their profitability [ 122 ]. This also suggests that firms with low leverage are high value firms and maintain lower duration of cash conversion cycle (CCC) at low levels that counts to higher profitability which ultimately leads to higher retained earnings and reduce the need for debt.

https://doi.org/10.1371/journal.pone.0287135.t005

Test of endogeneity effect and sensitivity analysis

Where ΔY it represents firm performance, ΔY it-1 is first lag of dependent variable firm performance. All the independent variables (cash flow measures and metrics) are denoted with ΔX it . CONTROLS it represents control variables and λ t shows time fixed effects, Ƞ i represents industry fixed effects, and ɛ it represents unobserved heterogeneity factors.

Table 6 represents estimated results obtained using Eq (8) . The findings of study observes significant negative association between cash flow measures, metrics and firm financial performance in the full sample, high leverage and low leverage subsamples, indicating that firms’ changes in cash flow measures and metrics bring significant positive improvements in financial performance. Overall, the results still hold after study considers the endogeneity problem, supporting the hypotheses of the study.

https://doi.org/10.1371/journal.pone.0287135.t006

Where ΔY it represents firm performance. All the independent variables (cash flow measures and metrics) are denoted with ΔX it-1 , and CONTROLS it represents control variables. D t shows time fixed effect, D i represents industry fixed effects, and ɛ it represents unobserved heterogeneity factors.

Table 7 represents estimated results of sensitivity analysis regression. The study finds that estimated coefficients of cash flow measures (ΔARTD t-1 , ΔITD t-1 , ΔAPTD t-1 ) and cash flow metrics (ΔCCC t-1 , ΔOCC t-1 ) are negative and significant, indicating that changes in previous period’s cash flow measures (ΔARTD t-1 , ΔITD t-1 , ΔAPTD t-1 ) and cash flow metrics (ΔCCC t-1 , ΔOCC t-1 ) bring significant positive changes in firm financial performance. The study finds similar results to the previously reported findings for alternative subsamples of high leverage and low leverage firms. Overall, the sensitivity analysis results still hold in consistent with the primary analysis results and ensure robustness of main analysis results of the study.

https://doi.org/10.1371/journal.pone.0287135.t007

Practical, managerial, and regulatory implications

This study provides significant practical, managerial, and regulatory implications for cash flow management and working capital management decisions in the corporate sector to improve performance. Most studies on cash flow management have focused on its relationship to profitability from the perspective of manufacturing companies. This research focuses on cash flow management by linking the leverage of non-financial firms in the Chinese context, a fundamental issue of corporate cash flow management and working capital investment that has not been studied much in the emerging markets scenario. Practically study suggests that a decline in cash flow measures and metrics positively enhances a company’s financial performance. Moreover, the paper determines that low-leverage industries perform healthier to cash flow measures and metrics changes. The study also reveals that companies in low-debt industries experience more positive improvements in their financial performance relative to high-debt industry companies. Therefore, the findings of this paper suggest that highly leveraged companies may be less conducive to improving corporate performance in industries where competitors’ leverage is relatively low.

Thus, from managers’ and policymakers’ points of view, the analysis found that changes in cash flow measures (ARTD, ITD, and APTD) and metrics (CCC and OCC) have led to significant positive improvements in the company’s financial performance. These positive changes in the CCC mean that changes in the accounts payable cycle appear to mitigate the combined impact of changes in the accounts receivable and inventory cycles. For managers, this finding suggests that reducing CCC simply by lowering APTD can translate into improvements in company performance. These findings provide rich insights and practical implications for managers and policymakers to use CCC as an operational tool to improve company performance. Therefore, managers and policymakers must actively evaluate the company’s policies regarding cash flow management, working capital management, corporate leverage, and capital budgeting policy before capitalizing on these companies.

Conclusion, limitations, and future implications

Cash flow management is the central issue of company operational strategies that affect a firm’s operational decisions and financial position. Firms’ effective policy of cash flow management is achievable through efficient management of working capital, which is possible through shorter days of accounts receivables, giving discounts on prompt payments, offering cash incentives, reducing inventory turning days through sound inventory management policies, shortening days of accounts payable by achieving rebate on early outlays. Likewise, inventory turnover may lead to a significant positive relationship with organizational performance symbolized by return on assets, cash flow margins, and return on sales in the JIT context. Moreover, high-performance firms may have a lengthier duration of days of accounts payables, which ensures the presence of liquidity. Many firms invest a large portion of their cash in working capital, which suggests that efficient working capital management significantly impacts corporate profitability.

This paper offers a strong insight and findings on cash flow management and firm financial performance by examining the Chinese full sample firms, high debt, and low debt firms to investigate the impact of changes in cash flow measures and metrics on firm performance. Using the exclusive cash flow measures and metrics data, study finds that decline in cash flow measures and metrics bring significant positive changes in firm financial performance. Moreover, study finds that low leveraged industries are better off in terms of changes in cash flow measures and metrics that bring more positive improvements in low debt industries firms’ financial performance relatively to high debt industries firms. This paper also demonstrates that, following firms’ leverage, high-leveraged firms may be less advantageous to enhance firm performance in industries where rivals are relatively low-leveraged.

The results of the study are consistent with the argument that changes in cash flow measure (ARTD, ITD and APTD) and metrics (CCC and OCC) bring significant positive improvements in firm financial performance. These findings furnish a great amount of insight and practical implication for manager to utilize CCC as operating tool in order to enhance firm performance. Firms by actively monitoring and controlling levers such as; ARTD, ITD, APTD, CCC, OCC can enhance financial performance. The findings of results are robust to different measures and metrics of cash flow and firm financial performance, following sensitivity analysis and endogeneity test still main results hold and ensures the robustness of primary analysis.

Study limitations and directions for future research

This research is of great significance to the studies on the relationship between cash flow management and enterprise performance in the Chinese market environment. However, the study did not consider some aspects that need consideration in future studies. This study uses Tobin Q to measure a company’s performance. However, it is also possible to include other company performance indicators that are important in the strategic impact of studies and may provide significant insights. The lack of data availability is a major constraint due to companies’ exits and entry into the sample period. This paper uses secondary data; however, studies can also use primary data to understand and gain appropriate knowledge of corporate cash flow management by combining archived and survey data to improve the robustness and significance of research findings in the context of emerging markets. This study focuses on the financial performance of firms. However, future studies can also use non-financial performance as a consequence variable.

Future extensions of this work may examine whether a company’s cash flow management policies in other areas of the supply chain have a similar relationship to company performance.

In addition, further inquiries that explore the directional association amid inventory and performance changes may extend the understanding of the cash flow management role in a company’s success. In addition, there is a need to explore more the impact of cash flow and working capital investment on firm performance by taking the market imperfections within the framework of emerging economies. Finally, the evidence of this research from the fastest emergent economy of the world may also use other transition economies to generalize for a widespread population group. Finally, studies in the future can consider linking product market competition with the cash flow measures, metrics, and firm performance relationship.

Supporting information

S1 appendix..

https://doi.org/10.1371/journal.pone.0287135.s001

Acknowledgments

The authors wish to thank anonymous referees for all value comments. The authors are responsible for any remaining errors.

• View Article
• Google Scholar
• 8. China, K. P. M. G. China’s 12th five-year plan: Overview. China : KPMG Advisory . 2011.
• 9. Hale G., Long C. What are the sources of financing of the Chinese firms? In Cheung Y.-W., Kakkas V., Ma G. (eds.) The Evolving Role of Asia in Global Finance . Emerald Group Publishing Limited. Bingley, UK, 2011; 313–337.
• PubMed/NCBI
• 40. Dewing A.S. The financial policy of corporations, fourth ed. The Ronald Press Company, New York. 1941.
• 41. Arnold G. Financial Times Handbook of Corporate Finance : A Business Companion to Financial Markets , Decisions and Techniques . Pearson UK. 2013.
• 42. Fisher I. Theory of interest: As determined by impatience to spend income and opportunity to invest it. Augustusm Kelly Publishers. 1930.
• 55. Laghari, F., Chengang, Y., Chenyun, Y., Liu, Y., & Xiang, L. Corporate Liquidity Management in Emerging Economies under the Financial Constraints: Evidence from China. Discrete Dynamics in Nature and Society , 2022.
• 82. Womack J.P. and Jones D.T. Lean thinking: banish waste and create wealth in your Corporation. Simon & Schuster, New York, NY. 2003.
• 87. Radjou N., Orlov L. M., & Nakashima T. Adapting to supply network change. Forrester Research Inc, Cambridge, Massachusetts. 2002.
• 88. Singhal, V. R. Excess inventory and long-term stock price performance. College of Management , Georgia Institute of Technology . 2005.
• 110. Field A. Discovering statistics using SPSS, (Second ed.). Sage Publications Ltd, London. 2005.

Moving from cash preservation to cash excellence for the next normal

When the COVID-19 crisis began to affect companies worldwide, the preliminary response of CEOs and CFOs was all about survival: freeing up cash and resources to keep the lights on and the doors open. The liquidity crisis triggered by the sharp disruption in economic activities prompted organizations to rush toward cash and liquidity to keep operations going.

Some industries were hit harder by the pandemic than others: aerospace, travel, oil and gas, and retail experienced a sharp drop in demand for their services and products, as well as restrictions on their operations. As the economic fallout from the pandemic hit their balance sheets, many companies quickly took drastic measures to preserve cash, such as significant cuts on capital expenditure, dividend cuts, reductions in external spending, and temporary plant closures. Governments responded by setting up large stimulus programs that included measures to improve companies’ liquidity and cash flows—for example, postponing the collection of government-related fees.

One silver lining to the crisis is that it revealed the critical importance of cash excellence—a set of best practices that enable prudent cash and liquidity management. In extraordinary times, extra cash can prevent a company from going bankrupt. Now, several months into the crisis, executives have a rare window of opportunity to build the current focus on cash into long-term cash excellence. Executives can focus on strengthening the cash culture across their organizations, changing underlying systems and mindsets, and implementing no-regrets moves to embed cash excellence into ongoing operations.

Building a strong cash culture across people, structure, and process dimensions

CFOs can use today’s short-term crisis in cash preservation as an opportunity to focus on sustainable cash excellence, supported by a strong cash culture from top to bottom.

Amid the pandemic, boardrooms have shifted their focus from earnings before interest and taxes (EBIT) to cash. They have also shown support for end-to-end cash management , which involves thousands of daily decisions made by individual employees at all levels: from CFOs managing the books to warehouse managers ordering spare parts to accounts-payable specialists making payments. A cash-focused culture across three dimensions—people, structure, and processes—is an important prerequisite for cash excellence (Exhibit 1).

A strong cash culture starts at the top. CEOs and CFOs need to set the tone by making cash a top priority. Companies that manage cash well regularly communicate to employees the importance of cash not only in the context of enabling resilience during a downturn but also in value creation—for example, by providing capital for investment in future growth. Leaders signal to the rest of the organization that capital efficiency metrics (for example, cash conversion cycle) are as important as metrics related to pure profit and loss (P&L).

An industrials company with multibillion-dollar revenues took on a focused cash transformation with the goal of rising to the top quartile among its peers. The company succeeded in releasing more than $150 million in cash within the first six months—capital that contributed to a strategic acquisition later that year. The CFO motivated employees throughout the transformation journey by continually reminding them why the company was focusing on cash (for example, to finance growth opportunities) and by drawing attention to the value created by this approach.

A strong top-down message should be paired with capability-building programs to ensure that employees understand the importance of cash and that they have the tools and knowledge they need to make decisions based on both P&L and cash implications.

Many organizations believe that cash management is the sole responsibility of finance, not business. A cash-focused organization overcomes this misconception and ensures that business and finance share ownership of cash performance. For example, accounts receivable should be a shared responsibility between finance and sales, not managed by finance alone.

Cash should be a regular agenda item in meetings of top management and finance leadership, with clear accountabilities. Leaders need to determine a regular cadence and structure to discourage behaviors that focus only on improving quarterly or year-end figures. For a more focused governance structure, some companies create a cash war room to elevate the topic to the highest levels of management and enable the company to move quickly to preserve cash. As these companies transition to the next normal, they should embed the rigor of cash-war-room governance into their existing governance structures.

One family-owned company in a distressed situation created a cash war room that featured daily hour-long meetings, chaired by the CFO, to review daily cash balances and identify opportunities for rapid cash improvement. Within eight weeks, the company captured €30 million in cash savings and cut its overdue accounts payable in half, restoring confidence with suppliers.

Clear accountabilities should be set at the appropriate levels. Decision rights should be assigned to employees at the lowest possible level, with an effective escalation structure up to the CFO for matters with significant implications on cash. An owner should be clearly assigned to each process (source to invoice, procure to pay, and overdue management) and empowered to improve its performance.

Would you like to learn more about our Strategy & Corporate Finance Practice ?

Companies need to define organization-wide cash key performance indicators (KPIs), give them clear targets, and ensure that they are monitored by the CFO. Indeed, assigning the right KPIs to the right level is critical. For example, return on invested capital (ROIC), working capital as a percentage of sales, and the cash conversion cycle can be set as KPIs at the top level, while operational KPIs such as percentage of overdues and early and late payments are appropriate for the front line. A clear and practical policy framework should be set in advance to guide frontline workers on daily decisions (for example, a “price tag” for capital to manage the trade-off between price discounts and payment terms). For an example of how a CFO’s monthly dashboard could incorporate KPIs, see Exhibit 2.

Company leaders should establish a coherent cash-reporting system across entities and make it regularly accessible to stakeholders throughout the organization, from the CFO to relevant frontline employees. Digital tools—such as a digitally enabled real-time financial reporting system on cash KPIs, or an automated system to complete repetitive tasks in back-office order-to-cash and procure-to-pay processes—can make the system more efficient.

Performance management process should ensure the ownership of cash targets by all relevant teams through aligned incentives. For example, sales incentives should be linked not only to sales targets but also to accounts receivable and overdues.

A regular newsletter or similar communication is an effective way to share success stories and lessons learned.

Implementing no-regret moves to embed cash excellence into ongoing operations

The pandemic demonstrated that a clear focus on cash excellence as part of ongoing operations prepares companies to be more resilient during a crisis and stronger and more competitive when emerging from it. Companies that managed cash prudently before the pandemic have remained resilient, while less-prepared companies faced existential threats in the face of a liquidity crunch (with some filing for bankruptcy).

Now is the time for CFOs to pivot from cash-preservation measures focused on the short term to structural cash levers.

Cash management can be broken down into four categories: working capital, capital expenditures, operating expenditures, and balance sheet (Exhibit 3). Here, we focus on structural improvements in the first two areas.

Working capital

Many companies faced significant challenges in managing working capital during the pandemic—customers and suppliers all faced unprecedented disruptions, highlighting the importance of rigorous process management through the entire cash-conversion cycle.

Accounts receivable

The additional financial stress brought on by COVID-19 has exposed the limitations of traditional approaches to accounts receivable.

Key challenges revealed by the crisis

The pandemic has exacerbated issues with overdues and bad debt. Chasing late payers has overburdened collection desks, especially those still relying on manual processes. Companies with strong cash management before the pandemic entered the crisis in a good position, enabling them to solidify customer relationships by granting longer payment terms for customers with cash-flow problems. Organizations that lacked rigorous payment-term contracting practices before the crisis could not afford to do so, potentially losing favor with customers.

Key levers and best practices to address the challenges

Organizations can focus on three areas to improve the cash flow from their accounts receivable.

Overdues management. We have seen companies successfully manage overdues by following two best practices.

First, successful companies establish robust customer-credit rating systems and clear policies on maximum credit exposure, maximum payment terms, and pricing. These systems and policies are accessible to sales, credit, and collection teams, and can help companies guide all new and existing customers through a proper onboarding process.

Second, successful companies focus on preventing future overdues as well as resolving current overdues. Many companies direct most of their efforts to fixing existing overdues without addressing the underlying issues that cause overdues to occur repeatedly. To identify and resolve the root causes, a cross-functional team should review the end-to-end process through a problem-solving lens.

Example: A B2B company observed a consistently high level of overdues because of a quantity mismatch in its online channel. This issue was caused by a lack of clarity among the team members responsible for website orders—a simple issue that nevertheless persisted for a long time because the IT, sales, and collection teams failed to share information. Establishing a cross-functional team across all three teams helped the company not only resolve this issue quickly but also uncover and fix other issues, leading to a significant reduction in overdue accounts. In addition to having a positive effect on accounts receivable, this move boosted morale among collection team members by reducing the time they spent working repeatedly on the same issues.

Advanced analytics tools can further enhance overdue-collection strategies. An analytics model can use inputs such as past payment behaviors and company financial health to predict a company’s likelihood of paying overdues with or without an intervention from the collection team.

Example: A downstream utilities company built an advanced analytics model to reduce collection costs and overdues. The utility company had previously used manually updated strategies segmented by country and customer group. The analytics model, which shifted to an invoice-level strategy adjusted on a real-time basis, assigned invoices to one of three categories: likely to be collected without any intervention, likely to be collected with an intervention, and unlikely to be collected even with an intervention. By focusing collection efforts on the second category, the company lowered collection costs by 15 percent and decreased overdues by 7 percent.

Payment terms. Two main levers make an impact on payment terms: standardizing payment terms and establishing effective customer-onboarding processes.

Standardizing payment terms with customers lowers accounts receivable, reduces errors, and increases the efficiency of the overall order-to-cash process. Best practice is to set standard payment terms globally. In some cases, a company might need to make specific adjustments for countries and customer groups based on market conditions. A company should understand the range of payment terms that are typically acceptable in its industry for each country, and make adjustments for the countries where the acceptable payment terms significantly deviate from the global standard payment terms. After setting the standard policy, finance and sales teams should work together to switch noncompliant terms to the standard.

Companies that do not have adequate resources to prioritize enterprise-wide standardization typically follow a sequenced approach. For example, they might start with low-hanging fruit such as customers with multiple payment terms caused by historical inefficiencies in contracting process. Streamlining these multiple terms within a single customer organization can be an initial step toward standardization.

Best-in-class customer-onboarding processes include effective control measures to ensure that all new customers opt in to the standard payment term with rare exceptions. Companies typically enforce this onboarding process as part of the system requirements and by regularly communicating the standard policy to sales and customer-onboarding teams.

Invoicing process. Close collaboration among sales, operations and project management, and invoicing teams is critical to streamline the invoicing process and avoid any delays. Communication lags between relevant departments within the company and process inefficiencies prevent the invoicing team from processing invoices in a timely manner. We often see this issue with complicated products and services that require manual invoicing—for example, projects with multiple invoice dates linked to specific milestones. Automating the process as much as possible, in combination with clear incentives linked to working capital, can help solve the problem.

Accounts payable

The pandemic’s sudden shocks have forced companies to take a more strategic posture on accounts payable to conserve cash while maintaining relationships with suppliers and vendors.

Supply-chain disruption and supplier-liquidity issues have become a big issue during the crisis. Just as on the accounts-receivable side, companies with more cash could solidify supplier relationships by paying them earlier and alleviating their cash-flow problems, while companies with poor cash flow struggled even to pay suppliers on time. Procure-to-pay teams have been overburdened with supplier complaints related to timely payments.

Revisiting established processes across three areas can give companies greater flexibility.

Supplier management. Top supplier-management systems enable companies to effectively share information on suppliers’ enterprise risk (such as bankruptcy) and past performance on price, quality, reliability, and code of conduct. Procurement and payment specialists have access to one integrated platform that they use to support negotiations on pricing and payment terms and identify alternative sourcing plans if needed.

Payment terms. As with accounts receivable, standardizing payment terms on the supplier side improves the efficiency of accounts-payable and procure-to-pay processes. Many companies have global standard payment terms for suppliers, but they experience varying degrees of compliance with the standard. An engaged and focused management team can achieve standardization quickly. For example, a global materials company made a step-change improvement on noncompliant supplier payment terms within a few months by mobilizing its procurement teams and implementing rigorous tracking mechanisms.

In the context of the recent cash-flow crunch, any move to extend payment terms should be made thoughtfully and in collaboration with suppliers to avoid losing momentum on standardization. To support this, companies can establish rigorous exception processes that require suppliers to apply for an exception to the standard terms if they face challenges in meeting those terms. The exception would then require approval from the CFO or chief procurement officer. This system allows companies to work with suppliers to find the best solutions while maintaining rigor by requiring C-suite approval.

Procure-to-pay process efficiency. To build trust-based partnerships with suppliers, companies must position themselves as reliable customers that pay on time, especially in light of recent supply-chain disruptions. The standardization of payment terms above can help streamline processes to reduce errors and increase reliability. Process automation using the latest technology (for example, robotic process automation) could also help reduce human errors and costs associated with the payment process.

Memo to the CFO: A new approach to 2021 budgeting starts now

Companies should recalibrate their inventory management strategy to optimize spending while ensuring resilience in their supply chain.

Disruptions in demand and the supply chain have caused large, unexpected fluctuations in inventory levels. Limitations on cross-border trades forced companies with global supply chains to move inventories to accessible locations and quickly find alternative sourcing options for affected suppliers. Companies also had to rapidly shift their supply chains to meet changing demands caused by dramatically altered consumption patterns. Examples include a big spike in demand for personal protective equipment (PPE) and essentials, and a drop in spending on virtually all discretionary items. For example, demand for luxury goods and petroleum dropped so much that luxury retailers used their production lines to produce masks, and petrochemical producers ramped up hand-sanitizer production in place of other chemical products. Overall, the crisis has highlighted the importance adapting inventory management models in a changing environment.

Companies that seek to increase visibility into their supply chain and emphasize collaboration across the supply chain can gain much-needed flexibility.

Rethink the supply-chain strategy in line with the changing business model. During the crisis, many companies are focusing on making changes to the supply chain. This task often requires a significant departure from the existing model, giving companies the opportunity to revisit and enhance inventory strategy. For example, as e-commerce becomes a more significant part of a retail company’s business, the company will need to change its warehouse locations and stock-keeping rules to align with an e-commerce business model. Lowering inventory levels through inventory pooling—a practice of consolidating multiple warehouses into a single location—could make sense in this case.

Companies must incorporate resilience into the new model. While maintaining the lowest possible level of inventory might have been a valid strategy before the crisis, companies now must find the right balance between increasing resilience—for example, by increasing a buffer or sourcing locally—and minimizing cash tied up to inventory.

Digital tools that increase visibility of the end-to-end supply chain help companies manage both dimensions effectively. Real-time visibility helps managers make quick decisions on which inventories to stock up on or repurpose based on the latest demand trends. The latest emerging technologies, such as blockchain and the Internet of Things, can further revolutionize end-to-end supply-chain management.

Establish supplier partnerships. The COVID-19 crisis has demonstrated that forging collaborative partnerships with suppliers is a better long-term strategy for ensuring success across the ecosystem than taking a zero-sum-game approach. Many companies made immediate payments to smaller suppliers to relieve their cash-flow problems, for instance. This new level of collaboration opens the door to better partnerships that will build resilience for the ecosystem in the long term.

Collaborative partnerships often incorporate greater transparency. In some ecosystems, the crisis has prompted many companies, even competitors, to become more transparent and more willing to share information. A company might share information on inventory levels with critical suppliers in real time, for example, or establish new contracting models that benefit both parties through shared costs and risks. One energy company partnered with a drone-technology company for asset maintenance under a long-term subscription model instead of an up-front purchasing model. This arrangement helped the energy company reduce the amount of cash tied to inventories and lower the level of expertise required to maintain the technology. The drone supplier gained both a long-term customer and a higher total purchase price over the entire period.

The foundation for collaborative supplier partnerships is rigorous supplier management to ensure higher standards and resilience. One global fashion company regularly evaluates suppliers on price, lead time, quality, and code of conduct, then segments suppliers into multiple tiers based on the evaluation. The first tier consists of critical suppliers that are top priorities for long-lasting relationships and enhanced collaboration. The last tier is for suppliers that did not meet the criteria and are targeted to be phased out. Regular, robust reviews of the supplier base can help companies optimize their supply chains and identify priority suppliers for collaborative relationships. 

Capital expenditures

Managing capital expenditures (capex) is another important lever in cash excellence. Companies should establish both a robust process to allocate capital and a strong project execution process to maximize the productivity of that capital.

Many organizations slashed capex right after the COVID-19 outbreak by 25 to 30 percent. Companies that had not been prudent in capex prioritization before the crisis made abrupt capex cuts that represented significant sunk costs in ongoing projects. Companies with more cash headroom have started actively thinking about allocating capital to future growth opportunities, leaving cash-poor companies that cannot afford to do so at a disadvantage.

Making the right investments during the recovery can help companies gain a competitive advantage; two areas should be priorities.

Capital allocation

A shift in cadence and processes can enable organizations to approach allocation decisions in a more nimble manner.

Employ an agile capital-allocation process. Companies with agile processes can reallocate capital dynamically  in times of heightened uncertainty. Past experience suggests that companies that reallocate outperform competitors that do not. In the current environment, dynamic capital allocation has become even more crucial. Many companies reallocate their capital on a one-, three-, and six-month basis rather than on an annual basis. The approval processes are highly iterative, with informal touchpoints between investment committee members and working groups.

Use a common yardstick. Companies should consider ranking investment requests using a common metric (for example, present value over investment) to create a holistic view of the overall investment portfolio. This view against a common yardstick can enable rigorous allocation of capex to investments with the highest return on investment (ROI). During uncertain times, a common set of scenarios that can be applied to test assumptions is key. Standardized templates and tools can also help streamline the process and provide transparency to stakeholders.

Capital productivity

Capital productivity is just as important as a good capital-allocation process. Successful companies evaluate past projects to identify best practices in completing projects on time and on budget. They also create structural systems to help them apply these best practices to all future projects. Conducting a postmortem analysis on one or two major successes and failures can provide rich insights.

Timing is essential in resetting an organization’s approach to cash management. During the COVID-19 crisis, companies have an opportunity to build momentum toward cash excellence. Organizations that seize the opportunity will be more competitive, while those that let the moment pass will find themselves on the sidelines again when the next crisis hits. By building a cash culture, improving underlying systems, and embedding cash excellence into ongoing operations, organizations can strengthen their competitive positions now.

Christian Grube is a partner in McKinsey’s Munich office, Sun-You Park is an associate partner in the London office, and Jakob Rüden is a partner in the Cologne office.

Explore a career with us

Related articles.

Why you’ve got to put your portfolio on the move

Cash preservation in response to COVID-19

• Search Search Please fill out this field.

What Is Cash Management?

• How It Works
• Cash Flow Statement
• Internal Controls
• Working Capital
• Solvency Ratios

The Bottom Line

• Corporate Finance

What Is Cash Management in Accounting and Why Is It Important?

The term cash management refers to the process of collecting and managing cash flows . Cash management can be important for both individuals and companies. It is a key component of a company's financial stability in business. Cash is also essential for people's financial stability while also usually considered as part of a total wealth portfolio . Individuals and businesses have different options to help them with their cash management needs, including banks to hold their cash assets. Cash management solutions are also available for anyone who wants the best return on cash assets or the most efficient use of cash comprehensively.

Key Takeaways

• Cash management is the process of managing cash inflows and outflows.
• There are many cash management considerations and solutions available in the financial marketplace for both individuals and businesses.
• Individuals can use options like banks and financial institutions for their cash management needs.
• For businesses, the cash flow statement is a central component of cash flow management.
• The cash flow statement is a central component of corporate cash flow management.

Investopedia / Nez Riaz

How Cash Management Works

Cash is among the primary assets that individuals and companies use to pay their obligations and invest. Managing cash is what entities do on a day-to-day basis to take care of the inflows and outflows of their money. Proper cash management can improve an entity's financial situation and liquidity problems.

For individuals, maintaining cash balances while also earning a return on idle cash is usually a top concern. In business, companies have cash inflows and outflows that must be prudently managed in order to:

• Meet payment obligations
• Plan for future payments
• Maintain adequate business stability

Corporate cash management involves the use of business managers, corporate treasurers, and chief financial officers (CFOs) . These professionals are mainly responsible to implement and oversee cash management strategies and stability analysis. Many companies may outsource part or all of their cash management responsibilities to different service providers. Regardless, there are several key metrics that are monitored and analyzed by cash management executives on a daily, monthly, quarterly, and annual basis.

Cash management may also be known in some parts of the financial industry as treasury management.

The Importance of the Cash Flow Statement in Cash Management

The cash flow statement is a central component of corporate cash flow management. While it is often transparently reported to stakeholders on a quarterly basis, parts of it are usually maintained and tracked internally on a daily basis.

The cash flow statement comprehensively records all of a business’s cash flows. It includes:

• Cash received from accounts receivable (AR)
• Cash paid for accounts payable (AP)
• Cash paid for investing
• Cash paid for financing

The bottom line of the cash flow statement reports how much cash a company has readily available.

The cash flow statement is broken down into three parts: operating, investing, and financing. The operating portion of cash activities tends to vary based heavily on the net working capital which is reported on the cash flow statement as a company’s current assets minus current liabilities . The other two sections of the cash flow statement are somewhat more straightforward with cash inflows and outflows pertaining to investing and financing.

Managing Cash Through Internal Controls

There are many internal controls used to manage and ensure efficient business cash flows. Internal controls are various accounting and auditing mechanisms that companies can use to ensure that their financial reporting is compliant with regulations. These tools, resources, and procedures improve operational efficiency and prevent fraud.

Some of a company’s top cash flow considerations include the:

• Average length of AR
• Collection processes
• Write-offs for uncollected receivables
• Liquidity and rates of return (RoR) on cash equivalent investments
• Credit line management
• Available operating cash levels

Cash Management of Working Capital

Cash flows pertaining to operating activities are generally heavily focused on working capital , which is impacted by AR and AP changes. Investing and financing cash flows are usually extraordinary cash events that involve special procedures for funds.

A company’s working capital is the result of its current assets minus current liabilities. Working capital balances are important in cash flow management because they show the number of current assets a company has to cover its current liabilities.

Working capital generally includes the following:

• Current Assets : Cash, accounts receivable within one year, inventory
• Current Liabilities : All accounts payable that are due within one year and short-term debt payments that come due within one year

Companies strive to have current asset balances that exceed current liability balances. If current liabilities exceed current assets a company would likely need to access its reserve lines for its payables.

Companies usually report the change in working capital from one reporting period to the next within the operating section of the cash flow statement. If a company has a positive net change in working capital, it increases its current assets to cover its current liabilities, thereby increasing the total cash on the bottom line. A negative change means a company increases its current liabilities, which reduces its ability to pay them efficiently and its total cash on the bottom line.

There are several things a company can do to improve both receivables and payables efficiency, ultimately leading to higher working capital and better operating cash flow. Companies that operate with invoice billing can reduce the days payable or offer discounts for quick payments. They may also choose to use technologies that facilitate faster and easier payments such as automated billing and electronic payments.

Advanced technology for payables management can also be helpful. Companies may choose to make automated bill payments or use direct payroll deposits to help improve payables cost efficiency .

Cash Management and Solvency Ratios

Companies can also regularly monitor and analyze liquidity and solvency ratios within cash management. External stakeholders find these ratios important for a variety of analysis purposes as well. The two main liquidity ratios analyzed in conjunction with cash management include the quick ratio and the current ratio.

The quick ratio is calculated from the following:

Quick Ratio = (Cash Equivalents + Marketable Securities + Accounts Receivable) ÷ Current Liabilities

The current ratio is a little more comprehensive. It is calculated from the following:

Current Ratio = Current assets ÷ Current Liabilities

Solvency ratios look at a company’s ability to meet all its obligations in the long term. Some of the most popular solvency ratios include debt to equity, debt to assets, cash flow to debt, and the interest coverage ratio.

Why Is Cash Management Important?

Cash management is the process of managing cash inflows and outflows. This process is important for individuals and businesses because cash is the primary asset used to invest and pay any liabilities. There are many cash management options available such as using excess cash to pay down lines of credit with a credit sweep . Cash management not only provides entities with a window into their financial situations but it can also be used to improve their profitability by fixing their liquidity problems.

How Can You Improve Your Cash Management?

There are a number of ways an individual or business can improve their cash management. Some of these steps include improving their accounts receivables (increasing income, encouraging clients to pay early/on time), investing excess cash, seeking out better financing rates on debt, safeguarding bank accounts to prevent fraud, and implementing better accounts payable processes.

What Is an Example of Cash Management?

Cash management can come in various forms, including the improvement of accounts payable processes. Let's say a business has an existing (and good) relationship with a vendor. The two have been doing business with one another for the last five years. The vendor ships supplies to the business every month and requires payment on its invoices every 30 days. Since the two have an amicable relationship, the business negotiates payment for invoices every 45 days.

Cash management is the process of successfully taking care of cash inflows and outflows. It's a process that's important to individuals and also for businesses. Being able to do manage cash efficiently means that the entity can keep money in its reserves, pay off its financial obligations, and invest for future development.

• Terms of Service
• Editorial Policy
• Privacy Policy

Academia.edu no longer supports Internet Explorer.

To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to  upgrade your browser .

Enter the email address you signed up with and we'll email you a reset link.

• We're Hiring!
• Help Center

A STUDY ON CASH MANAGEMENT ANALYSIS OF NMB BANK A Research proposal

Related Papers

Suneeta Aryal

ABSTRACT Banking system plays significant role in the economic development of a country. A banking institution is indispensable in a modern society. The basic function of the bank is to collect deposits as much as possible from customers and mobilize it into the most preferable and profitable sector like industry, commerce, agriculture, entertainment and so on. There are various tools to measure financial position of banks. Liquidity analysis is the one of the major tool to analyze liquidity position of the bank. Liquidity is crucial in the business like banking sector. Banks have to maintain liquidity, if the bank has high liquidity it cannot gain desired profit and if bank has the shortfall of the liquidity it cannot satisfy its customers and inadequate liquidity may lead to collapse of the bank. This study attempt to know the liquidity position of NIBL and PBL; which banks performance is best and which bank’s liquidity position is better. This study is related with comparative liquidity analysis of NIBL and PBL for the period of 2011/12 to 2015/16 A.D. Necessary data are taken from the annual reports of these two banks: NIBL and PBL such as published balance sheet/ unaudited balance sheet, profit and loss account and related statement, net, website, and so on. This study is based on secondary data. For the study, liquidity analysis of NIBL and PBL has been done. In this study liquidity ratio is calculated to find out the liquidity position of these two banks. This study is useful to investors, creditors, banks, customers and other parties who are related to these two banks. This study reveals that liquidity position of both banks: NIBL and PBL. The current ratio of both banks is less than normal ratio (2:1) which are 0.994 and 1.010 respectively. But in comparison, PBL has the better current ratio than the NIBL. From this study, the researcher concluded that, both bank have to maintain its liquidity position forwarded. The ratio of loan and advances to total deposit ratio of NIBL and PBL are (i.e. 0.739 >0.671). From the analysis; it is concluded that PBL has been successfully utilized their deposits in term of loan and advances for profit generating purpose compared to NIBL. The Liquidity position of cash and bank balance to total deposit ratio of PBL is higher than that of NIBL (i.e0.401 < 0.594). So, it is concluded that PBL has sufficient cash and bank balance to current & saving deposit than that of NIBL and so on. This analysis shows that both banks have to increase their liquid position but in comparison PBL is liquid than the NIBL. The major income sources of both banks are interest income where as expenses are staff bonus, interest expense and so on.ABSTRACT Banking system plays significant role in the economic development of a country. A banking institution is indispensable in a modern society. The basic function of the bank is to collect deposits as much as possible from customers and mobilize it into the most preferable and profitable sector like industry, commerce, agriculture, entertainment and so on. There are various tools to measure financial position of banks. Liquidity analysis is the one of the major tool to analyze liquidity position of the bank. Liquidity is crucial in the business like banking sector. Banks have to maintain liquidity, if the bank has high liquidity it cannot gain desired profit and if bank has the shortfall of the liquidity it cannot satisfy its customers and inadequate liquidity may lead to collapse of the bank. This study attempt to know the liquidity position of NIBL and PBL; which banks performance is best and which bank’s liquidity position is better. This study is related with comparative liquidity analysis of NIBL and PBL for the period of 2011/12 to 2015/16 A.D. Necessary data are taken from the annual reports of these two banks: NIBL and PBL such as published balance sheet/ unaudited balance sheet, profit and loss account and related statement, net, website, and so on. This study is based on secondary data. For the study, liquidity analysis of NIBL and PBL has been done. In this study liquidity ratio is calculated to find out the liquidity position of these two banks. This study is useful to investors, creditors, banks, customers and other parties who are related to these two banks. This study reveals that liquidity position of both banks: NIBL and PBL. The current ratio of both banks is less than normal ratio (2:1) which are 0.994 and 1.010 respectively. But in comparison, PBL has the better current ratio than the NIBL. From this study, the researcher concluded that, both bank have to maintain its liquidity position forwarded. The ratio of loan and advances to total deposit ratio of NIBL and PBL are (i.e. 0.739 >0.671). From the analysis; it is concluded that PBL has been successfully utilized their deposits in term of loan and advances for profit generating purpose compared to NIBL. The Liquidity position of cash and bank balance to total deposit ratio of PBL is higher than that of NIBL (i.e0.401 < 0.594). So, it is concluded that PBL has sufficient cash and bank balance to current & saving deposit than that of NIBL and so on. This analysis shows that both banks have to increase their liquid position but in comparison PBL is liquid than the NIBL. The major income sources of both banks are interest income where as expenses are staff bonus, interest expense and so on.

Ali Sheikhdon

The purpose of the study was to conduct a survey of Liquidity management factors affecting in financial performance of the commercial banks in Mogadishu, Somalia. The study design was used is descriptive survey, the target population of the study was 112 employees of commercial banks in Mogadishu. A sample size of 87 respondents was selected using Slog van's formula. Data collection methods used included questionnaire. The selection sample technique was purposive or judgmental approach. Data was analyzed using SPSS version. The key findings were that liquidity management drivers individually had a positive influence on the financial performance of commercial banks in Mogadishu-Somalia. The overall results indicated that there was a significant linear relationship between account receivable management, account payable and cash management on financial performance of commercial banks in Mogadishu. The conclusions were based on the objectives of the study that liquidity management drivers had a significant influence on financial performance of commercial banks. The results established that liquidity management drivers were found to significantly and positively influence financial performance of commercial banks in Mogadishu, Somalia. The study results support the view that liquidity management drivers have a significant effect on financial performance. It is recommended that managers should study and select the driver that best suits their banks in order to achieve maximum performance.

Loading Preview

Sorry, preview is currently unavailable. You can download the paper by clicking the button above.

•   We're Hiring!
•   Help Center
• Find new research papers in:
• Health Sciences
• Earth Sciences
• Cognitive Science
• Mathematics
• Computer Science
• Academia ©2024

• Nebraska Medicine

Multi-Year Projects

Improving safety climate and safety culture in the cattle feedyard industry.

The long-term   goal of this project is to reduce the burden of injuries and illnesses among feedyard workers. The   objective of this project is to improve safety climate and safety culture on cattle feedyards through the   adoption of a comprehensive feedyard safety and health training and commendation program. The   specific aims of this project are to:  identify the motivators and barriers to conducting safety trainings on   cattle feedyards; develop and implement a new safety climate and safety culture survey tool for cattle   feedyards; and develop, disseminate, and evaluate an open source Feedyard 15 online commendation  program.

About project PI Aaron Yoder, PhD.  

Learn more about the  Feedyard Worker Safety  project. 

Multiple Methods Approach to Study the Impact of Stress among Latino Immigrant Cattle Feedyard Workers in the Central States Region

The   purpose of this study is to explore the  relations between distinct life stressors,  risk  and protective   factors, perceived current stress, and their relations with occupational injuries, physical and   psychosocial health, and social well-being among Latino immigrant cattle feedyard workers in the   Central States region using our Ecological Stress-Based Model of Immigrant Worker Health and Safety.   This study will identify severe types of stress and their   associations with occupational injuries, physical and psychosocial health, and social well-being   outcomes across time and industry-specific seasons . Our   findings will provide valuable information for developing interventions and generating health promotion   and safety education resources using a Total Worker Health approach for Latino immigrant agricultural   workers.  

About project PI Athena Ramos, PhD, MBA, MS, CPM.

Learn more about the  Immigrant Workforce  project. 

The Exposome and Organic Dust-Induced Lung Injury

Building on our previous research, the purpose of this project is to determine whether exposome-altered innate lung defense   caused by organic dust inhalation negatively impacts susceptibility and pathogenesis of bacterial   pneumonia, placing individuals with COVID-19  exposure, alcohol use disorders (AUD), or zinc deficiency particularly in harm’s   way.  Defining   the mechanisms of risk will empower clinicians to make informed preventive care decisions in the  real-world   context of the exposome.

About project PI Todd Wyatt, PhD.

Establishing a Community-Based Training Network to Enhance the Safety of Bison Herd Workers on Tribal Lands

This project aims to work with the  InterTribal  Buffalo Council  to conduct much needed research regarding best practices for   bison herd management practices, provide applied worker safety training, and facilitate herd   management training and peer mentorship for managers. Trainings and mentorship will be conducted   from within the indigenous community to ensure that the proposed interventions are culturally   appropriate, and reflect the Tribes' goals for bison production and management programs . Through adapting the lens of the research and intervention strategies to   an indigenous-led research, training ,  and assessment program; we aim to not only increase our   knowledge of best practices within this growing industry, but also to increase the likelihood of that   interventions will be adopted .

About project PI Mystera Samuelson, PhD.  

Learn more about the  Bison Worker Safety  project and the annual round table of bison herd workers and managers, hosted in collaboration with the InterTribal Buffalo Council.

Evaluating the Safety of Agricultural Vehicle Ingress/Egress for Aging Producers

Falls from agricultural vehicles for aging producers may result in serious, potentially career-ending, injuries. This research leverages novel observational techniques and an assessment of strength, balance, and ingress/egress performance to design user-centered interventions for the reduction of producer fall and injury.

About project PI Bethany Lowndes, PhD, MPH.

Surveillance of Agricultural Injuries

The CS-CASH Surveillance program aims to gain a comprehensive understanding of the burden of occupational injury and illness; working population characteristics; injury and illness frequencies and rates; related exposures, risk factors and costs; and preventive strategies that could reduce the burden of injury and illness in the Center’s region, and nationally. View the  Farm & Ranch Safety Survey.

About project PI Risto Rautiainen, PhD.  

Health Equity

40 Undergraduate Health Disparities Research Scholars Finish Their Summer at Penn

Week-long event marks 25th anniversary of ldi/wharton school program.

• Hoag Levins
• Share this page on Twitter
• Share this page on Facebook
• Share this page on LinkedIn

Twenty-five years after it was established as a joint Leonard Davis Institute of Health Economics and Wharton School Health Care Management Department program aimed at attracting students interested in health disparities research into advanced health care degree studies, the Summer Undergraduate Mentored Research (SUMR) program ended its quarter-century anniversary year with a week-long seminar spotlighting the scholar’s projects.

A Quarter Century

“Looking back 25 years since Mark Pauly and I began this as a program that we hoped would work, it’s still amazing to me to see how much it has grown and how many of its participants have gone on to incredible careers in health care. I can’t say enough about how enriching it has been to have had the support of the Wharton School, LDI, and hundreds of Penn faculty members who devote so much of their time and energy to mentoring these students,” said Joanne Levy , Founding Director of the SUMR Program, LDI Director of Student Initiatives, and Associate Director of Wharton’s PhD Program in Health Economics.

The SUMR program includes ten scholars from its offshoot program Get Experience in Aging Research Undergraduate program (GEAR UP) , and an additional two students from the Penn LDI Dental Summer Health Services Research Fellowship program .

Health Disparities Research

Scholars are mostly undergraduates from universities and colleges across the country who are immersed in a special health care management curriculum and paired with Penn faculty mentors on real research projects. This year, 40 students from 26 schools are involved in research focused heavily on health and health care disparities and advancing the needs of underrepresented groups in health services, population health, and clinical epidemiology. Along with hands-on research, the summer-long program also includes an intense curriculum of lectures by some of the country’s top health services research professors.

At the end, in a five-day marathon of presentations before an auditorium audience of parents and faculty members, each of the 40 scholars deliver a scientific report on the research they were engaged in during the summer. The topics include a broad range of studies such as “Understanding the Association Between Cash Transfer Programs and Health Outcomes in Low- and Middle-Income Countries,” “The Racial and Ethnic Disparity in Genetic Research Databases,” “The Effects of Transitional Housing Programs on Health and Economic Outcomes Among People with HIV: A Systematic Review,” and “Addressing Health-Related Social Needs (HRSN) Screening Processes in the Inpatient Setting: Challenges, Opportunities, and Lessons.”

More LDI News

In Their Own Words

Population Health

A Navy Veteran Tested Positive For Alcohol. The Cause Lay In His Diabetes Drug And Poor Testing Procedures

Case Underscores the Need to Improve Medical Tests in Court

• Aaron Schwartz, MD, PhD
• and Tamar Lerer, JD

Health Care Access & Coverage

How For-Profit Hospitals Billed More Aggressively Than Nonprofits For Medicare Outlier Payments: A Case Study From the Early 2000s

For-Profits Were Also Likelier to Spend New Revenue on Executive Pay and Share Buybacks

• Atul Gupta, PhD

To Help People on Medicare and Medicaid, We Must Pay Providers for Integrating Care

People Enrolled in Both Medicare and Medicaid are Getting Much Needed Attention, An LDI Conference Shows

• J. Margo Brooks Carthon, PhD, RN
• and Gary Rettberg, MPP

Advancing Equity In Kidney Transplantation Through The Increasing Organ Transplant Access Model

LDI Fellows Discuss Equity in Health Affairs Forefront

• Yuvaram Reddy, MBBS, MPH
• Amol S. Navathe, MD, PhD
• Sri Lekha Tummalapalli, MD, MBA, Gaurav Jain, MD, Sumit Mohan, MD, MPH, Mallika L. Mendu, MD, MBA

Why Latine Immigrants Say They Avoid Prenatal Care—And What Encourages Its Use

Community Members Suggest Ways to Increase Trust and Decrease Anxiety About Getting Care

• Chris Tachibana, PhD, MS

Penn LDI/Health Affairs Conference Explores Dual Eligibles Care Integration

Latest Effort to Re-envision a Disjointed System That Shortchanges a Highly Vulnerable Patient Population

The Bartlett School of Sustainable Construction

Book Launch: Research Handbook Sustainable Project Management

02 September 2024, 6:00 pm–8:00 pm

How to consider Sustainability in Managing and Leading Projects and Programmes to create a better future?

Event Information

Availability.

During this event for Project Decision Makers, Project and Programme Professionals and Scholars; Professor Martina Huemann and Dr Gilbert Silvius will share main highlight on the book and provide practical insights. 

About the Speakers

Prof martina huemann, dr gilbert silvius.

Ohio State nav bar

The Ohio State University

• BuckeyeLink
• Find People
• Search Ohio State

• Ohio State University Libraries
• Research Guides

BIOMEDE 4901.02 Biomedical Engineering Design I

• Agile Project Management
• Getting Started
• Formulating a Research Question
• Find Journal Articles and eBooks
• Engineering Standards
• Patents and Innovations
• Writing Resources and Zotero

Explore Agile Project Management eBooks

Estimating Project Priorities & Results

• << Previous: Find Journal Articles and eBooks
• Next: Engineering Standards >>

© The Ohio State University - University Libraries 1858 Neil Avenue Mall, Columbus, OH 43210 Phone: (614) 292-OSUL (6785) | Fax: (614) 292-9101

Request an alternate format of this page | Accessibility | Privacy Policy

Print Page Login to LibApps

Content Search

Cash and voucher assistance (cva) specialist.

• Adventist Development and Relief Agency International

Job Summary:

The CVA Specialist will manage and lead the Cash and Voucher Assistance related responses across ADRA Myanmar program. The CVA Specialist will be responsible for supporting the planning, implementation and tracking the achievement of the project targets related to CVA.

The CVA Specialist will provide technical direction, provide recommendations for improvements, evaluate, and build the local capacity of project teams and coordinate with local partners as and where assigned. The CVA Specialist will assess current needs on an ongoing basis and assist in the business development process to ensure future funding. The CVA Specialist will conduct market assessments and monitor changes in market prices. Regular activity reports and market studies will be required.

The CVA Specialist will support other ADRA sector teams to incorporate cash and voucher approaches into their programming. The position will also play a critical role in enhancing operations of cash and voucher programs by strengthening practice and procedure between ADRA’s program, finance, and supply chain teams.

The position requires an individual that has experience in CVA programming, emergency programming and is self-directed, flexible, and highly responsive.

Main Responsibilities

General Duties

• Uphold the mission and values of ADRA Myanmar.
• Adhere to the regulations, procedures, and policies of ADRA Myanmar.

Key Responsibilities

• Strength the ADRA Organizational Cash Readiness (assessment and improvement plan)
• Organize and bring technical support to ADRA team to get CVA training (online CaLP training).
• Provision of direction and overall management of the cash and voucher components of ADRA programs and improvement of the cash preparedness of ADRA.
• Support the development of policies and guidelines including and not limited to SOPs, Beneficiary registers, data protection requirements, information management tools, risk mitigation and management tools, vendor/FSP mapping tools etc, communication material for CVA interventions of ADRA based on international and local standards.
• Development of work plans according to project outputs and outcomes as per donor agreement.
• Lead with feasibility and market assessments and provide recommendations on the feasibility of CVA interventions and modalities.
• Lead the design and conduction of assessments and monitoring efforts (including utilization of tools and means such as monitoring through site observations, exit surveys, PDMs and market and price monitoring etc. as appropriate) such as and ensure strong data analysis to inform programming including identification of priorities and preference of target communities, in collaboration with the MEAL Specialist
• Lead and support the Cash Feedback and complaint mechanics at community level.
• Prepare and organize Leaning meetings on Cash from ADRA interventions and documented it.
• Lead the identification effort of vulnerable families in the targeted areas and ensure the high quality of the data collected during the assessment.
• Coordinate and lead with development and facilitation of dissemination of CVA messages and ensure appropriate end effective feedback and complaint mechanisms are established.
• Ensure that gender, environment, and protection are mainstreamed throughout activities.
• Prepare and organize the cash distributions in liaison with the relevant ADRA staff and with Financial Service Providers including the preparation of the SoWs and contracts for FSPs, beneficiary list, relevant supporting documents, etc.
• Liaise with local authorities, other NGOs, and other relevant coordination bodies to avoid duplication of assistance and exclusion/inclusion errors.
• Enhance referrals pathways across programs/sectors and ensure information dissemination of project objectives to communities.
• Advocate and support development of integrated programs to support wholistic recovery and development efforts across ADRA’s portfolio.
• Support proposal development and budget planning based on data analyzed and needs mapped and identified across the country for both individual projects and at strategic planning of ADRA
• Provide timely program reports that meet ADRA and donor requirements.
• Represent ADRA at the Cash Working Groups, relevant cluster meetings, and other stakeholder or coordination meetings, as needed, and maintain a positive, continuous, and visible presence for ADRA.
• Prepare and present information on the CVA components of ADRA’s projects and overall CVA program including analysis of results and conditions.
• Support CWG and other related clusters in determining the transfer values (localized and national) based on data collected and analyzed through programs.
• Develop and maintain strategic relationships with local partners, local authorities, and communities.
• Work with other teams to ensure sound practices about record keeping, compliance with donor regulations, communications, etc.
• Lead with recording best practices & recommendations, case studies, innovations & pilots and in dissemination of such reports and findings based on supervisor’s input.
• Assess and capacitate project teams on CVA to ensure effective and efficient programs are implemented across ADRA’s portfolio.
• Facilitate donor visits to project sites as required
• Stay current with all regional and country-specific response plans by donors active in the CVA sector, and other stakeholders.
• Attend project team meetings and provide support towards planning, monitoring, capacity building etc. as needed.
• Provide regular updates to the supervisor and management team as requested.
• Perform other duties as assigned by supervisor.

Qualifications and Skills:

• Bachelors/ master’s degree in social science, disaster management, project management, economics, business administration, or related field.
• Certificate of CVA fundamental by CaLP
• Professional experience in developing countries on managing cash-based assistance programs.
• Experience of organizing Market Assessments needed for cash planning
• Experience in contracting and working with financial service providers.
• Experience in analyzing market systems, CVA feasibility assessments and vendor/FSP selection
• Good understanding of the project cycle – including beneficiary targeting, aid delivery mechanisms, and Monitoring and Evaluation.
• Demonstrated experience in budget management, including for institutional donors
• Good understanding of core humanitarian standards (CHS) including safeguarding and Accountability to Affected Population (AAP)
• Experience in managing teams, including volunteers.
• Significant analytical skills and ability to suggest and implement solutions to complex project related challenges
• Excellent interpersonal skills and ability to work well as part of a multi-disciplinary team.
• Excellent communication, organizational, and presentation skills
• Demonstrated ability to manage multiple, priorities and deadlines efficiently and effectively. Computer proficiency in Microsoft Office Suite
• Experience working within Myanmar (Preferred)
• Advanced English proficiency, in writing, speaking, reading

How to apply

Interested candidates are requested to submit their applications by 30th August to HR Recruitment Team [email protected]

The applications should include the following documents:

• Cover letter explaining the suitability and expertise for the position.
• Resume / CV
• References with contact details from previous/current employment(minimum of 2).

Related Content

Myanmar emergency overview map: number of people displaced since feb 2021 and remain displaced (as of 12 aug 2024), peace monitoring dashboard: july 2024 [en/my], myanmar coup dashboard: july 2024 [en/my], informe del mecanismo independiente de investigación para myanmar (a/hrc/57/18).