Forecasting the Liquidity of Very Small Private Companies

Posted: 21 Dec 2013

See all articles by Dusan Mramor

Dusan Mramor

University of Ljubljana - Faculty of Economics

Aljosa Valentincic

University of Ljubljana - Faculty of Economics

Date Written: November 1, 2003

Abstract

Short-term liquidity of very small private companies (VSPCs) is important to creditors as any cash shortages result in opportunity costs due to delayed payments. We use a publicly available liquidity indicator for 19,627 Slovenian VSPCs as a special, but generalizable case of “credit record” data and financial ratios to predict possible cash shortages. Indicator is predicted and used in lagged form(s) as a predictive variable with/without financial ratios, allowing comparisons. Models, including financial ratios, are less efficient than models based on lagged liquidity indicator alone. Surprisingly, combined models perform only marginally better. Despite high overall accuracy, misclassification of companies experiencing cash shortages is high.

Keywords: Liquidity, financial ratios, private firms, micro entities, financial reporting, earnings quality, SME

Suggested Citation

Mramor, Dusan and Valentincic, Aljosa, Forecasting the Liquidity of Very Small Private Companies (November 1, 2003). Journal of Business Venturing, Vol. 18, No. 6, pp. 745-771, 2003. Available at SSRN: https://ssrn.com/abstract=2370336

Dusan Mramor

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 1 589 2400 (Phone)
+386 1 589 2698 (Fax)

Aljosa Valentincic (Contact Author)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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