Die gebruik van kontantvloei- en winsgegewens by die beoordeling van genoteerde industriele RSA-maatskappye se finansiele stabiliteit

[摘要] ENGLISH ABSTRACT: Several mixed industry prediction models about failure have been reasonablysuccessful in differentiating between successful companies and those that havefailed. The challenge, however, is to venture into the grey area in between and toidentify companies, which are financially unstable, at an early stage. Earlyidentification enables management to intervene timeously in an attempt to preventfailure. Failure is defined as either liquidation, delisting, suspension of listing or asubstantial change in structure.The grey area focused on in this study is overtrading. Overtrading is triggered by thecompany growing at too high a rate relative to its specific structure. Cash isnecessary to fund expansion, whether for an increase in inventories, credit sales ornew non-current assets. If the company does not generate enough cash to fund thisexpansion, it has to be financed through external sources. The longer the period ofgrowth and the higher the growth rate, the more the cash requirements.From the theoretical model underlying overtrading, it was found that:• the higher the growth in sales,• the smaller the profit margin, and• the higher the net current assets in proportion to total assets,the lower the cash flow from operating activities before dividends were paid (CFO).Any company ought to generate enough cash from its daily activities in order tomaintain the existing level of business, to repay loans, to replace assets and to paydividends. If the internal generation of cash is insufficient to finance these activities,existing cash resources will be consumed, unproductive non-current assets will besold and possibly also some of the productive non-current assets. The outcome forsuch a company is a business combination or liquidation. Due to the fact that cashplays such a big role in failure, cash flow variables constitute the majority of theindependent variables used in the development of the failure prediction models.The overtrading ratio was developed as a measurement tool to quantify overtrading.As long as the company generates a positive CFO, it is not so much at risk as acompany that does not succeed in generating a positive CFO. Therefore, a negativeCFO for a three-year period was decided on as the norm for identifying possible financial difficulty. A company is involved in overtrading if the sum of CFO for threeyears less the sum of the adjusted profit for the three years, divided by the absolutevalue of the sum of the adjusted profit for the three years equals -1 or smaller in thecase of a company with a cumulative profit for the three years; and smaller thannought in the case of a company with a cumulative loss for the three years.South African industrial companies listed for at least three years during the period1974 to 2003, were identified. From a total of 6 662 cumulative three-year periods,944 overtrading years were identified. Failure occurred in 212 out of 526 companiesinvolved in overtrading between January 1974 and August 1989. 120 out of 199companies involved in overtrading between September 1989 and November 1995failed, while 90 out of 127 companies involved in overtrading, failed betweenDecember 1995 and June 2000. By June 2005 it was already evident that 49 out of92 companies involved in overtrading between July 2000 and December 2003, hadalready failed.Companies involved in overtrading, may survive artificially for lengthy periods withthe support of providers of capital. It can therefore be expected that failure predictionmodels will not achieve a better accuracy rate than achieved by probabilities. Sixfailure prediction models utilising classification tree algorithms were developed. Usingdata from two periods, two different models were developed; one for growth andrecession phases of the economy, the other without distinction between economicphases. The first period was September 1989 to June 2000, the other December1995 to June 2000. June 2000 was chosen as the cut-off, since a period of five yearsafter an overtrading year was necessary to follow-up whether the company hadfailed. Each universe was split in two – the learning sample, more or less 60%, andthe test sample, more or less 40%. The models were developed from the learningsample and the test sample was used as substantiation of the results of thedeveloped model.The total classification accuracy of the three best models, one for the growth-phase,one for the recession-phase and one mixed economy model, is respectively 72,99%,96,67% and 80,26% and the classification accuracy for the failed companies 75,29%,100% and 85,19% respectively. The total prediction accuracy of the three models isrespectively 69,23%, 80,95% and 72,55%, and that of the failed companies 73,68%,86,67% and 83,33%. The accuracy of all the models was found to be higher than what the accuracy would have been if all the companies involved in overtrading weremerely classified as having failed.From the results of the different tests, it seems that Ver3, the growth in sales fromyear 1 to year 3, is probably the most important independent variable in theclassification between failed and non-failed overtrading years. This corroborates thetheory underlying overtrading that indicates that a high sales growth puts a companyat risk for cash flow problems.Companies where the cash flow problems develop because of an increase in currentassets will be intercepted by the overtrading ratio. Companies where cash flowproblems develop due to replacement of non-current assets, will not necessarily beintercepted by the overtrading ratio as CFO that is used in the overtrading ratio doesnot allow for replacement of non-current assets. It is therefore necessary to adjustCFO to a free cash flow CFO.Depreciation is used as an alternative for replacement investment since disclosure ofreplacement investment is not required. Depreciation is theoretically the fraction ofthe value of an asset lost during the year; this value needs to be replaced. Bysubtracting the depreciation for the year from CFO, this amount will be morerepresentative of the cash position of the company after considering all the normaltransactions in order to sustain the business.After all the adjustments for a free cash flow, six models were developed for thedifferent periods and economic phases. The accuracy of these models were betterthan what the accuracy would have been if overtrading years were merely classifiedas failed. Implementing these models would therefore improve specificity.From the tests performed, Ver3 and KVB3/TB (the cumulative CFO for the threeyears over total assets) seem to be the most important independent variables in theclassification between failed and non-failed when considering free cash flow. This isinformative as KVB3:TB represents a fictional amount, as if the company spent anamount equal to depreciation on replacement investment.

[发布机构] Stellenbosch University