Determination of The Relationship Between Operating Cycle Risks and Other Risks: An Application on The Bist Textile Index

Aksoylu S., Boztosun D., Altınışık F., Baraz E. H.

Muhasebe ve Finansman Dergisi, vol.0, no.0, pp.65-80, 2017 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 0 Issue: 0
  • Publication Date: 2017
  • Journal Name: Muhasebe ve Finansman Dergisi
  • Journal Indexes: TR DİZİN (ULAKBİM)
  • Page Numbers: pp.65-80
  • Kayseri University Affiliated: No

Abstract

“Corporate Risk Management”, which has been applied in developed economies since the beginning of the 21st century, has changed the risk perceptions of corporations and tended to guide them from sectional to integrated risk perception. Corporations desiring to take measures to protect themselves against risk groups in which they are weak in sectional risk perception may overlook the impacts of other risk groups. For instance, a measure taken to increase forward sales to improve profitability may result in a loss in the liquidity or activity cycle of the corporation. Although risk identification and grouping is a significant phase of corporate risk management, it is quite hard to measure th ese risks and to determine their quantitative impacts. Therefore, in this study, an easy risk classification was performed to cover the entire corporation. In this classification, the ratios obtained from the financial statements of the corporations were used as the variables representing the risks. To represent operating cycle risks, the “Accounts Receivable Turnover”, “Accounts Payable Turnover”, “Inventory Turnover”, “Current Assets Turnover”, “Total Assets Turnover” and “Equity Turnover” ratios were used. Then, the relevant fina ncial ratios were determined by using the financial statements (for the years 2003-2014) of 17 corporations included in the BIST Textile Index. Following the identification and calculation of the ratios representing the risks faced by the corporations, the impacts of t he measures to be taken on other risk groups were investigated. For this purpose, correlation analysis was performed between the ratios selected to represent the operating cycle and the ratios representing the other risk groups, the strength and direction of th e correlation were identified. Correlation analyses revealed that specific cases were valid for each corporation but a concrete generalization could not be made between the operating cycle risks and other risk groups. On the other hand, a generalization could be made only within each corporation for each ratio separately.