Study on Companies from the Energy Sector from the Perspective of Performance through the Operating Cash Flow

Abstract

In this paper we analyzed the link between companies’ performance, in terms of cash and income, and the labor productivity or management rates, in case of the companies from the energy sector listed on the Bucharest Stock Exchange. We focused on the energy sector because of the impact that its expansion has on the evolution of economies around the world and because of its dynamics in the sense of gradually shifting to the use of energy from renewable sources. We have used panel regression models to analyze the operating cash flow and the profitability rates and the determination of a causal or dependency relationship with labor productivity or management rates. The results of this study show a significant negative correlation between operating cash flows and the average duration of stock rotation, and no correlation between productivity and the operating cash flow. Instead, the average duration of stock turnover does not at all influence the profitability rates, and productivity is always significant for the return on assets, ie forthe return on equitywith a positive coefficient, as expected. The gap between the average duration of payment of suppliers and the average duration of receivables does not significantly influence neither the cash flow nor the rates of return.

Investor Response to Financial Performance and Business Prospect

“…CFO describes the cash generated from the company's day-to-day business activities. The higher the CFO, the lower the external funding needed by the company to fund its current operating activities [98]. The company can also use CFO to predict its future [99].…”

“…CFO is measured by adding net income with noncash expenses and the net increase in working capital [98].…”

Does Capital Structure Drive Profitability in the Energy Sector?

“…Although the existing evidence on the relationship between capital structure and a firm's profitability is considerable [11][12][13][14][15]25,26], there is a visible scarcity of works that address the specifics of the energy sector. More importantly, the existing evidence on the energy sector offers ambiguous results or is limited to a single-country-oriented perspective, e.g., Apan and ˙Islamo glu [27] analyzed the profitability of the energy firms in Turkey, Fareed et al [28] in Pakistan, Taliab [29] in the USA, and Sabău-Popa et al [30] in Romania. The larger scope of research was presented in the work by Lameira et al [31], which analyzed the profitability of energy firms located in the Euro-zone.…”

What are the internal determinants of return on assets and equity of the energy sector in Turkey?

“…In financial accounting, operating cash flows represent positive cash flows from the main activities of a business or cash flows from the day-to-day operations of the business. Operating cash flow indicates when the company will need external financing or whether it is generating enough cash flow to continue its current operations without the need for external financing (Sabău-Popa et al, 2021).…”