Business Commons^™

Deferred Taxes And Cash Flow Predictability, Kaleb Norwald, Jake Thornock

Journal of Undergraduate Research

Companies are sometimes required to pay taxes on events that have not yet occurred. This tax is called a deferred tax asset or DTA. These companies will receive a refund on this special type of tax, but the refund won’t be dispersed until years later. (Sometimes, this can take up to twenty years.) The slow reimbursement of a tax refund inhibits a company’s ability to grow, hire, and innovate as it unnecessarily constrains cash flow. Additionally, since this type of tax can be 7-13% of annual operating profits, the refunds are often very sizeable amounts.

The reimbursement process can be …

Corporate Financial Flexibility, Investment Activities, And Cash Holding: Evidence From Indonesia, Rahmat Heru Setianto, Addenver Kusumaputra

Indonesian Capital Market Review

This paper examines empirically the impact of financial flexibility on investment activities. Furthermore, we also investigate how financial flexibility determines the sensitivity of investment activities to cash flow. Using annual data of Indonesian manufacturing firms spanning five years, our analyses reveal that financial flexibility enhances investment ability and decreases sensitivity of investment activities to cash flow. Further analysis indicates that financially flexible firms in Indonesia tend to hold higher cash as a buffer to achieve financial flexibility. These findings yield important implications to managers and investors as Indonesia’s domestic market is expanding rapidly and large business opportunities are created. This …

Simplified Method For Teaching Cash Flow Statement Construction To Entrepreneurship And Non-Accounting Majors, Dale T. Eesley

Mountain Plains Journal of Business and Technology

It is a common mantra of entrepreneurs that cash is king, and educators in entrepreneurship have stressed the need to make the understanding of cash flows a central theme early in a student’s education (Leauby and Wentzel, 2012; Pearl, 1986; Wouters, 2008). However, the ability to teach entrepreneurship students how to develop a statement of cash flows is viewed by many as a difficult task for educators. Many students struggle to understand the indirect method of modeling cash flows (Vent and Cocco, 1996) because the method of constructing the cash flow statement is not intuitive (Hodder, Hopkins, and Wood, 2008). …

A System Dynamics Approach To Assessing Public Policy Impact On The Sustainable Growth Rate Of New Ventures, Jeff W. Trailer, Kuau Garsson

New England Journal of Entrepreneurship

The growth of firms is fundamentally based on self-reinforcing feedback loops, one of the most important of which involves cash flow. When profit margin is positive, sales generate cash, which may then be reinvested to finance the operating cash cycle. We analyze simulations of a sustainable growth model of a generic new venture to assess the importance of taxes, and regulatory costs in determining growth. The results suggest that new ventures are particularly vulnerable to public policy effects, since their working capital resource levels are minimal, and they have few options to raise external funds necessary to fuel their initial …