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Working capital, profitability, liquidity and solvency of healthcare insurance companies

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Author Info

  • André Luiz de Souza Guimarães

    (BNDES)

  • Valcemiro Nossa

    (Fucape Business School – FUCAPE)

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    Abstract

    The purpose of this study is to analyze the adequacy of a working capital management normative model, in terms of profitability, liquidity and solvency. Through an empirical and analytical research, the analysis of variance results (ANOVA) of a sample containing financial information from 621 healthcare insurance companies for the year 2006, show that different working capital structures are associated with different levels of profitability, liquidity and solvency, suggesting a preference order different from the one theorized by Fleuriet / Braga. The results indicate that a certain structure – where financial current assets exceed onerous current liabilities, and cyclical current assets exceed cyclical current liabilities – is associated with higher levels of profitability, liquidity and solvency. In addition, the study reiterates the importance of efficient management of working capital to the performance and survival of healthcare insurance companies.

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    File URL: http://www.bbronline.com.br/public/edicoes/7_2/artigos/ue5pe6yfqq10122010150747.pdf
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    Bibliographic Info

    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 7 (2010)
    Issue (Month): 2 (May)
    Pages: 37-59

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    Handle: RePEc:bbz:fcpbbr:v:7:y:2010:i:2:p:37-59

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    Postal: Fucape Business School Brazilian Business Review Av. Fernando Ferrari, 1358, Boa Vista CEP 29075-505 Vitória-ES
    Phone: +55 27 4009-4423
    Fax: +55 27 4009-4422
    Web page: http://www.bbronline.com.br/
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    Related research

    Keywords: Working capital; profitability; solvency; healthcare; Fleuriet Model;

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    1. Grice, John Stephen & Ingram, Robert W., 2001. "Tests of the generalizability of Altman's bankruptcy prediction model," Journal of Business Research, Elsevier, vol. 54(1), pages 53-61, October.
    2. Edward I Altman & Tara K N Baidya & Luis Manoel Ribeiro Dias, 1979. "Assessing Potential Financial Problems for Firms in Brazil," Journal of International Business Studies, Palgrave Macmillan, vol. 10(2), pages 9-24, June.
    3. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, 09.
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