Machinery Industry Enterprises Risk Resistance & Efficient Financial Liquidity Decisions: The Case of Rema S.A.
Posted: 13 Aug 2012
Date Written: January 1, 2012
Machinery 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 volatility of prices of raw materials for its production. Enterprise financial liquidity management can reduce risk influence on enterprise results. General economic situation influence enterprise ability to generate value for its owners depending on kind of business and individual enterprise flexibility and risk sensitivity. The paper presents the consequences that can result from operating risk that is related to liquidity policy in the context of machinery industry enterprises. 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 enterprise. 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 machinery industry empirical data.
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