Measuring the Effects of Innovation Investments by FCFF on the Financial Performance of Hungarian Companies
DOI:
https://doi.org/10.21637/GT.2024.4.03Kulcsszavak:
Investment, Cash Flow, Financial EconometricsAbsztrakt
It is widely acknowledged that investment in innovation is a sig-nificant determinant of long-term business growth and competitiveness. Ne-vertheless, accurately gauging the financial return on such investments remains a significant challenge. This study examines the impact of inno-vation-related expenditure on the financial performance of Hungarian firms over the period 2010-2019. A novel formula developed by our research team is employed to analyse the effect of these investments on the FCFF (Free Cash Flow to Firm), thereby offering a unique approach to quantifying the estimated return on investment (ROI) of investments in innovation. The re-search is based on a comprehensive dataset of balance sheets of several Hun-garian companies, which allows for a robust period-by-period analysis. The results aim to provide theoretical insights and practical applications for cor-porate financial management, highlighting how strategic innovation in-vestments can be leveraged for sustainable financial success.
JEL Codes: C58, E22, G31, O32
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