This research aims to test the ability of accounting earnings versus cash flows to predict future cash flows in the Tunisian context. The study sample consists of 37 companies listed on the Tunisian financial market for the period 1998-2012. In this study, we provide evidence of the ability of accounting earnings and cash flows to predict cash flow for one and two subsequent years. The results show that for simple models whose variables of prediction is one or two years of delay, it is the operating cash flows that have the most interesting predictive capacity. However, for multi-year models, accounting earnings is most relevant in terms of predictive power of future cash flows.

The purpose of this study is to investigate the ability of earnings and its components to predict future cash flows for Tunisian companies. We provide evidence on the ability of aggregate earnings, accruals and its components to forecast one or two-period ahead cash flows.The results of the models show that disaggregating earnings into cash flows and total accruals enhance the predictive ability of earnings relative to aggregate earnings. Furthermore, consistent with prediction, the disaggregating total ac-cruals into its major components (change in accounts receivable; change in inventory; change in accountant’s payable, amortization, and other accruals) significantly enhances the predictive ability of earnings. Each accruals component’s proves a significantly power to predict future cash flows.