FORECASTING THE RISK OF CHANGES IN OPERATING CASH FLOW IN THE RESTAURANT BUSINESS

Orlin Popov

Abstract


The purpose of this publication is to fill the lack of research and publications on one of the main types of risk in the restaurant sector. In this article, using real data from the restaurant sector, the worst case scenario of a deficit in net operating cash flows for a period of seven days in the future is predicted. For this purpose, the cash flow at risk (CFaR) approach was used. The CFaR using the bottom-up approach was calculated using a Monte Carlo simulations. Mathematically, the simulation algorithm is programmed in an Excel environment using built-in and programmable inverse cumulative probability distribution functions. Risk business factors in the model framework of cash flow at risk are simulated by using triangular, normal, uniform, Beta distribution, Geometric Brownian motion and others.


Keywords


risk management, cash flow at risk (CfaR), restaurant business, Monte Carlo simulation, Bottom-up approach, triangular distribution, normal distribution, uniform distribution, Beta distribution

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