Kenley, R (1999) Cash farming in building and construction: A stochastic analysis. Construction Management and Economics, 17(3), pp. 393-401. ISSN 01446193
Abstract
Cash flow management is a significant issue in the management of a building or construction firm. This paper steps back from the well researched area of poor cash management and its relationship with failure, to focus on the funds which are generated through operations, and the positive benefits which can follow in a well managed organization. A stochastic model is developed which illustrates how an average of 16% of turnover can be available for reinvestment. This is sufficient to allow investment in non-liquid assets, provided that this is managed carefully and precautions are taken against a severe reduction in turnover. This level of funds is sufficient to encourage firms to enter the industry with the motivation of generating funds, rather than a desire to build. This has implications for large clients and for government when dealing with the industry.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cash farming; liquidity; monte carlo; net cash flow; stochastic modelling |
| Index terms: | cash flow management, liquidity, modelling, cash flow, turnover, construction firm, motivation, stochastic analysis |
| Subjects: | financial management, organization, mathematical modelling, psychology, business management, economic analysis, analytical methods |
| Topics: | Human Resources, Research Practice, Engineering Principles, Business Strategy, Cost Management |
| Descriptive scope: | 3 PCA |
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