Markku Penttinen

Profitability, Liquidity and Solvency of Wood Harvesting Contractors in Finland

In order to respond to global competition challenges, the wood-processing industry in Finland and elsewhere is outsourcing roundwood harvesting to harvesting contractors. The industry also seeks to negotiate with fewer, larger and more diverse contractor enterprises. The weak profitability, liquidity and solvency of harvesting contractors and the consequent difficulty in hiring qualified machine operators make networking and enterprise growth a complicated process. Financial data of 1,060 Finnish wood harvesting contractors from the period 2001 to 2007 were studied using the ‘closing of the accounts’ data. The material represents most of the full-time contractors. For 2007 net profit was about 6%, credit share of turnover over 50% and median financial reserve €18,000. High machine depreciation and interest expenses together with low solidity make it difficult for small enterprises to absorb seasonal variations and to cope with recessions. Profitability varies considerably amongst smallest enterprises, which most often are sole-operator enterprises. Moreover, even the median profit of the smallest enterprises tends to be negative, which means that enterprise capital will be consumed and many enterprises are at risk of failure. Larger enterprises are more likely to be limited liability companies. Their median profit is clearly positive and the profit varies relative little between enterprises.

Myopic and stationary solutions for stochastic cash balance problems

This paper presents constructive solutions to stochastic cash balance problems. The model studied is in a periodic review framework with convex holding and shortage costs levied both in the beginning and at the end of each period. Transaction costs are linear, with the possibility of unequal fixed and proportional parts for orders and disposals. Optimal myopic solutions are presented for convex and linear costs. The application of an integral of the cumulative demand distribution yields simple formulae for solving the exact values of the policy parameters. The logistic distribution is used to obtain results readily applicable in day-to-day decision-making. Approximations of the Wilson formula type are developed and compared with earlier contributions. Conditions for the optimality of myopic policies are also presented. Stationary solutions are developed, and compared with myopic results in order to evaluate the amount of suboptimality. The stationary distribution and the optimal policy are given for the bilateral exponential demand distribution case. All results have been programmed and tested against the local finance market data.

Accounting as a management tool for non-industrial private forestry

Non-industrial private forest owners (NIPF owners) supply most of the roundwood in Scandinavia. For these owners, it is the supply of timber that provides income and return on invested capital. Owners have to decide whether to invest more in their property, or to disinvest. They have to find ways to increase revenue and cut costs. By applying business accounting practices to traditional forest accounting we propose principles for profit and loss accounts and balance sheets for NIPF owners. We argue that it is important for the forest owner to complement the strictly regulated accounting with contingent adjustments. An economic analysis of a medium-sized forest holding illustrates the importance of this type of adjustment. Research on this question can help to increase economic awareness among private owners and to support the harmonization of forestry accounting in the EU.

Proactive and reactive computer network maintenance policies: accounting and risk

This study analyses factors affecting investment decisions concerning end-user support based on information on accounting and failure statistics. Bayesian tests have been developed to evaluate the vendor mean time between failure figures of communication concentrators. Bayesian posterior failure distributions have been estimated both in the deterministic and random failure intensity cases, the last of which results in a simple binomial distribution with an annual mean of 16 communication concentrator failures and a standard deviation of five failures. The cost parameters and failure statistics suggest that proactive costs of k€92 compared with average reactive costs of k€96 annually support a network monitoring investment of k€35, but no additional ad hoc preventions. Results for the day-to-day decision-making in the data processing management of a mobile phone company have been analysed. These can also be generalised for other equipment and even more comprehensive problem analyses enabled and limited by accounting and failure statistics information support.