Food Processing Industry Enterprises Risk Sensitivity & Efficient Financial Liquidity Decisions: The Case of Krajowa Spółka Cukrowa S.A.
Posted: 13 Aug 2012
Date Written: December 12, 2011
General economic situation influence enterprise ability to generate value for its owners depending on kind of business and individual enterprise flexibility and risk sensitivity. Enterprise financial liquidity management can reduce risk influence on enterprise results. Food processing industry from one side have not a comfort of stable demand on its production and is strongly linked with volatility of realized incomes and also very often face the seasonal delivery of raw materials for it production. The paper presents the consequences that can result from operating risk that is related to liquidity policy in the context of food processing industry firms. An increase in the level of liquid assets in an enterprise increases both net working capital requirements and the costs of holding and managing financial liquidity. Both of these decrease the value of the firm. But not always it works in the same way, it depends on risk sensitivity of the business which differ between branches and individual representatives from each branch. Case study data presents and is an material for discussion about general model presented in first part of the paper. The relation between liquid levels and risk sensitivity is also illustrated by empirical data from food processing industry empirical data.
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