Paradox of Operating Cycle: Entrepreneurial Financial Liquidity Management Experiences and Perspectives in EU and Outside EU: German, Austrian and French Data Illustration

PROCEEDINGS OF THE 2ND INTERNATIONAL CONFERENCE ON EUROPEAN INTEGRATION 2014 (ICEI 2014)

8 Pages Posted: 17 May 2014 Last revised: 9 Jan 2015

See all articles by Grzegorz Michalski

Grzegorz Michalski

Uniwersytet Ekonomiczny we Wrocławiu - Faculty of Engineering and Economics

Date Written: May 15, 2014

Abstract

There is believed that German and French economies set the tone for other EU economies. It is why we use data from German speaking countries of EU and France for illustration of our findings in context of other EU countries like Czech Republic or Poland. Effectiveness of liquid assets investments is only one from possible explanations of liquidity measures in firms. Too small liquid assets lead some firms to negative changes in their sale levels and as effect to weaker profits. Destruction of cash revenues creation possibilities is dangerous for them and is hard to rebuild possibilities to create cash revenues. Financial liquidity investment efficiency model (FLIEM) predicts that before the crisis, during the crisis and after the crisis phases are connected with higher levels of working capital in processing enterprises. Investments in liquidity are a hedging instrument against individual risk sensitivity that is higher in crisis affected times. The paper aim is to compare real economy data with FLIEM predictions.

The FLIEM model expected that liquidity measures like current liquidity indicator should be treated as forecasting indicator about future risk sensitivity of the entities. It could be also suitable as forewarning impulse of future standing of whole processing part of economy.

Keywords: Liquidity, Liquidity measures, Risk sensitivity

JEL Classification: D92, E44, G00, G01, Q14

Suggested Citation

Michalski, Grzegorz, Paradox of Operating Cycle: Entrepreneurial Financial Liquidity Management Experiences and Perspectives in EU and Outside EU: German, Austrian and French Data Illustration (May 15, 2014). PROCEEDINGS OF THE 2ND INTERNATIONAL CONFERENCE ON EUROPEAN INTEGRATION 2014 (ICEI 2014). Available at SSRN: https://ssrn.com/abstract=2223245 or http://dx.doi.org/10.2139/ssrn.2223245

Grzegorz Michalski (Contact Author)

Uniwersytet Ekonomiczny we Wrocławiu - Faculty of Engineering and Economics ( email )

ul. Komandorska 118-120
Wroclaw, 53-345
Poland

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