Optimum cash flow in company activity cycle (growth, maturity, and wane) to emphasize on the risk of financing and profitability

Increasing the level of cash is costly and on the other, its shortage is likely to result in major losses. By analyzing marginal cost of maintenance and cash flow deficit one can determine the optimum level of cash holdings in companies.
This study seeks to answer the question of whether in different stages of company’s activity cycle, adjustments are different from optimum cash flows, Whether the risk of company’s activities has any impact on this process and last but not least, whether the level of profitability influences deviations from optimum cash flows.
The current study utilises multiple regression analysis and panel data for the period 2010- 2015 and is conducted in163 active companies, which are listed on Tehran stock exchange. The research findings indicate that the different phases of growth, maturity, and wane have different adjustment speeds towards optimum cash flow and the highest number of adjustments occurs during the maturity period while the lowest takes place during the waning phase. It was also discovered that financing risk has an effect on the gap between the real cash flow and optimum cash flow and when the risk of financing is high, the said gap becomes wider which translates into a lower adjustment speed. In companies with higher level of profitability adjustment speed towards optimum cash flow is lower than those with lower level of profitability