Cash conversion cycle

Cash

Economics

Computer science

Capital expenditure

Business

Cash management

Cash on cash return

Politics

Political science

Monetary economics

Cash and cash equivalents

Internal medicine

Cash flow forecasting

Medicine

Operating cash flow

Programming language

Database transaction

Finance

Investment (military)

Cash flow statement

Logistic regression

Tourism Economics

This study identifies the financial characteristics that tend to distinguish cash-rich from cash-poor publicly traded US restaurant firms operating in the 1999–2010 period. The resulting logistic regression model, developed from a forward stepwise selection procedure, is able to classify sampled firm-year observations into cash-poor and cash-rich groups with a 73.4% accuracy rate. The authors find that cash-rich restaurant firms tend to have greater investment opportunities, which make cash in hand appealing. However, cash-poor restaurants are more likely to be larger, to hold more liquid-asset substitutes, to make greater capital expenditures and to display more robust cash flows – characteristics that enhance borrowing power and/or reduce the need to hoard funds. Hence, the findings suggest a prominent role for the precautionary and transaction motives in restaurant cash-holding decision making.

Identifying the Financial Characteristics of Cash-Rich and Cash-Poor Restaurant Firms: A Logistic Regression Analysis