Fleuriet's Rebuttal to 'Questioning Fleuriet's Model of Working Capital Management on Empirical Grounds'
8 Pages Posted: 11 Jun 2005
Date Written: June 12, 2005
In his article to "Questioning Fleuriet's Model of Working Capital Management on Empirical Grounds", Otavio R. De Medeiros (2005) questions the validity of the so called Fleuriet's model, which was introduced in Brazil in the late 70's. According to De Medeiros, the model is empirically inconsistent. This rebuttal demonstrates the deficiencies of his criticism. His analysis is based on a wrong interpretation of the model's premises. The model's premises are now widely used in Europe and increasingly so in the United States. As a result, De Medeiros' test rests on nothing more substantial than his own misunderstanding. It is ironic that De Medeiros questions the validity of the model at a time when similar approaches are being developed in the U.S., nearly 30 years after this model was introduced in Brazil. Finally I show that with such an approach, one could have read through Enron's 2000 financial statements. I conclude with advocating a wider use of this method in Brazil.
Keywords: Fleuriet's model, Brazil, Enron, Net Liquid Balance, Working Capital Management.
JEL Classification: M41, G30, G39, C12, C21
Suggested Citation: Suggested Citation