Dilemma of Directions for Reinvestment

Pavla  Pokorná; Jarmila  Šebestová; Šárka  Čemerková

doi:10.23762/FSO_VOL7_NO4_6

Published : 2019-12-20

Vol. 7 No. 4 (2019)

Dilemma of Directions for Reinvestment

Pavla Pokorná

https://orcid.org/0000-0001-5166-6521

Jarmila Šebestová

https://orcid.org/0000-0002-7493-0759

Šárka Čemerková

https://orcid.org/0000-0002-1462-0169

DOI: https://doi.org/10.23762/FSO_VOL7_NO4_6

Abstract

Successful entrepreneurial activity is mostly connected with added value creation. This activity simply means that each process generates a profit to increase the financial value of the company. The next step, from the financial point of view, is to make decisions on how to properly reinvest the profit generated to positively influence the company in the future. This study investigates the factors that have the potential to affect profit reinvestment decisions based on primary research on 238 business entities in the Czech Republic. Using primary data collection, it was possible to explain the main motives, such as payback period or extra benefit from reinvestment, as the most significant factor influencing reinvestment direction. Finally, the average reinvestment percentage rate is very low (20%), when the recommended value is mostly about 64%. Surprisingly, factors such as age, gender or competitive advantage were confirmed to be statistically non-significant. Finally, this article suggests future directions for the development of portfolio models.

Keywords:

Management, profit, reinvestments, strategy

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Pokorná, P. ., Šebestová, J. ., & Čemerková, Šárka . (2019). Dilemma of Directions for Reinvestment. Forum Scientiae Oeconomia, 7(4), 83–99. https://doi.org/10.23762/FSO_VOL7_NO4_6

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Pavla Pokorná

pokorna@opf.slu.cz
https://orcid.org/0000-0001-5166-6521

Affiliation:

Silesian University in Opava, School of Business Administration in Karvina Czechia

Bio Statement (e.g., department and rank)

Pavla Pokorná, is a Ph.D. candidate and lecturer at Silesian University in Opava, School of Business Administration in Karvina. She holds a master’s degree in Business Administration. Her research interests include reinvestments, SMEs and business models and Logistics.

Jarmila Šebestová

sebestova@opf.slu.cz
https://orcid.org/0000-0002-7493-0759

Affiliation:

Silesian University in Opava, School of Business Administration in Karvina Czechia

Bio Statement (e.g., department and rank)

Jarmila Šebestová, PhD is Associate Professor at Silesian University in Opava, School of Business Administration in Karvina, and is an experienced researcher focusing on Small Businesses. She has participated in a number of international projects, including IPREG (Innovative Policy Research for Economic Growth) and the E-WORLD project (International Entrepreneurs Network). She is the Vice President of the European Council of Small Businesses for the Czech Republic. Her research interests include small business performance and small business dynamics.

Šárka Čemerková

cemerkova@opf.slu.cz
https://orcid.org/0000-0002-1462-0169

Affiliation:

Silesian University in Opava, School of Business Administration in Karvina Czechia

Bio Statement (e.g., department and rank)

Šárka Čemerková, PhD is Assistant Professor at Silesian University in Opava, School of Business Administration in Karvina. She completed her doctoral studies at the Faculty of Economics of the Technical University of Ostrava in 2005 in the field of System Engineering and Informatics. Her research interests include business economics and management, especially in the field of logistics.