Economic growth and cash flows for service companies in the department of Santander, Colombia from 1995 to 2014

Abstract

The aim of this paper is to determine the relationship between the economic growth and the cash flow in the service companies in the Santander Department, Colombia, and, afterward, to be able to make truthful projections for future cash movements in Santander by using the results of our study. Consequently, the financial statements of the 135 companies (being this the initial number of businesses studied in this research) were obtained after being reported to the Superintendencia de Sociedades during 1995. Even so, the study could only be applied to 15 companies, being these the enterprises that constantly reported their financial states from 1995 to 2014 to the Superintendencia de Sociedades. Cash flows and financial expenses were calculated for these companies. Throughout this, the statistic relationship between them and the growth of the local economy was determined. The data in this regard was obtained from DANE during the aforesaid period of time. The most important finding obtained from this study was the statistic relationship between the cash flows and the local economy growth (which rose to -0.125). This result did not prove to be satisfactory, nonetheless, if it is intended to make projections by adding the cash flows to the financial expenses. The statistic relationship decreased and went from being an indirect correlation to a direct one (0.025). The main conclusion is that there is not a direct, and meaningful, relationship between the service companies’ cash flow of Santander region and its local economic growth. It is not possible to predict the businesses’ future cash flow due to the fact that the model is not consistent, nor valid, enough to make such projections.