Optmization of Treasury

It should be noted that the chain of causality is not clear: the number and nature of the selected relationships remain
quite arbitrary; they vary also from one author to another.
3 - THE LIMITS OF THE NORMATIVE VALUE OF THE METHOD OF RATIOS.
In order to make a judgment on the management of a company, it is convenient to dispose of reference standards.
Among the many possibilities for the development of standards, the financial analyst uses most commonly either
professional standards or standards «models».
3.1 - THE REFERENCE TO PROFESSIONAL STANDARDS.
The calculation of professional standards is the fact, either large companies with a service of documentation and
studies, Federations or unions, either from private, public and parasternal bodies, or even spreadsheets plants.
These studies are from larger or smaller samples of firms engaged in the same business. Within each sector of activity
are calculated average reports for the whole sector, as well as by family of companies (or subsector). At these average
ratios will be compared to the enterprise in question ratios. It is not so for the latter to set goal value of such average
ratio, but rather to seek an explanation of the observed differences.
At the present moment, as a result, the company has a mass of valuable information on the performance of
competing firms (concurrent) or other firms from the same group (T-mantis, MATHE…). By confrontation, the
contractor can highlight some shortcomings of management that do not appear in simple individual analysis. This
may be the case, for example, of the progressive emergence of a fiscal imbalance likely to jeopardize the safety of
the firm within months, or most certainly in the years to come.
However, may be from this type of references identify financial principles fundamental and, consequently, a course
of action? We risk not take reality for the optimum?
3.2 - THE REFERENCE TO STANDARD MODELS OF MANAGEMENT.
Some specialized agencies have implemented "statistical processing chains" that allow to build 'business models'
characterized by a battery of ratios. The method consists in the establishment of ratios-types that reflect the 'average'
situation of the sector of activity. Indeed, each type ratio represents an average calculated from the ratios of a
number of companies forming a representative sample.
These models constructed for the set of a profession are an interesting reference for the company. The ratios of the
company are reported to standard ratios in the sector of activity; calculate and report:
R = RATIO OF THE COMPANY / RATIO- TYPE
The position of the undertaking is synthesized by the sum of the ratios obtained; each of them is assigned a weight
that takes into account the importance attached to each of the criteria. The situation of the firm is considered
satisfactory if the end result is higher than 100%.
This method has, however, a great deal of arbitrariness in its development:
Arbitrariness in the choice of the characteristic ratios of a situation (in our example, the solvency of the
company),
Arbitrary in the choice of weights, and, therefore, arbitrary in the judgment on the company.
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