The Operational Sustainability of the Firm : The operational performance versus financial solvency binomial - OPFS

Jose Antonio De França; Nathália Alves Carvalho; Clésia Camilo  Pereira; Eduardo Tadeu  Vieira

doi:10.31686/ijier.vol9.iss1.2909

Authors

Jose Antonio De França Universidade de Brasilia (UnB) https://orcid.org/0000-0002-8233-3620
Nathália Alves Carvalho Universidade de Brasilia
Clésia Camilo Pereira Universidade de Brasilia
Eduardo Tadeu Vieira University of Brasilia - UnB

DOI:

https://doi.org/10.31686/ijier.vol9.iss1.2909

Keywords:

Operational Performance versus Financial Solvency, nominal payment capacity, degree of operating leverage (DOL), operational sustainability of the firm

Abstract

This article presents the research results that assess a firm’s operational sustainability by combining the Degree of Operating Leverage (DOL) with the Current Liquidity Ratio (CLR) to present the Operational Performance versus Financial Solvency (OPFS) binomial, using a non-parametric model. The combination of the DOL with the CLR identifies metrics that indicate that a firm operates at full installed capacity and injects synergy at the generation of financial assets. The model was tested with data from standardized financial statements from 48 firms distributed among 6 sectors of the Brazilian economy, from 2007 to 2017. The results obtained suggest that, when a firm operates at full installed capacity, the DOL varies between 1 and 2, and the CLR is higher than the DOL. From the 6 sectors contemplated by the sample, 4 stand out by operating at full installed capacity with the CLR higher than the DOL, and 2 sectors signal some idleness with the DOL above 2 and the CLR lower than the DOL, such as the Public Utilities Sector (PU) indicating the highest efficiency among all. These results are relevant to illustrate that the combination of the DOL with the CLR is robust enough to evaluate a firm’s operational sustainability.

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Author Biographies

Jose Antonio De França, Universidade de Brasilia (UnB)

PhD in Accountancy and in Economics. Professor of the Department of Accounting and Actuarial Sciences - University of Brasilia - UnB
Nathália Alves Carvalho, Universidade de Brasilia

Bachelor in Accountancy Sciencies
Clésia Camilo Pereira, Universidade de Brasilia

Doctor in Accountancy
Eduardo Tadeu Vieira, University of Brasilia - UnB

Professor

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