Financial and nonfinancial factors affecting future cashflow and their impacts on financial distress

Abstract

This study aimed to determine financial and non-financial factors influencing future cash flow and their impacts on company's financial distress. This study uses earnings, cash flow from operations, accrual components, working capital (financial), inflation (nonfinancial) as independent variables that are thought to have an effect on future cash flow. In addition, this research also suspects that there is an impact of this influence on company financial distress. The sample used in this study was 30 food and beverage manufacturing companies listed on the Indonesia Stock Exchange from 2013 to 2015. Hypothesis testing, in this research, used Structural Equation Model (SEM) method with AMOS 24 statistic. The result showed that earnings, accrual component, and working capital had a significant positive effect on future cash flow. Furthermore, cash flow from operation had significant negative effect on future cash flow, but inflation did not affect company's future cash flow. These results indicate that financial variables have a significant effect, both positive and negative, on the company's future cash flow. Meanwhile, non-financial variables have no significant effect. Other test resulted that future cash flow had a significant negative effect on financial distress. Based on the results of this study, it can be seen that stakeholders, especially investors, really pay attention to the company's financial performance compared to non-finance. This is due to the significant influence of financial variables on the company's future cash flow and it can have an impact on financial distress. Therefore, future research is expected to explore other financial factors that affect the company's future cash flow, for example, the company's financial risk.

Effect of Corporate Governance Mechanism and Operating Cash Flow on Financial Distress

“…The greater the value of operating cash flow, the smaller the possibility of the company experiencing financial distress and conversely the smaller the value of operating cash flow, the greater the possibility of the company experiencing financial distress. The results of this study support the research of Fawzi et al (2015), Kordestani & Bakhtiari (2011), Safiq & Kusumastati (2020), Kamaluddin, A, et.al (2019 and the research of Karas & Reznakova (2020).…”

“…Kordestani & Bakhtiari (2011) stated that financial distress can be predicted by the content and composition of the cash flow report. The results study of Safiq et al (2020) show that future cash flows can provide a signal about financial distress. Karas & Reznakova (2020) examines the ability of cash flow to predict financial distress because insufficient cash flow has a close relationship with business difficulties.…”

Investment in tangible non-current assets and financial performance of food manufacturing firms in Nigeria

“…Similar assertion was made by Musah et al (2019) who asserted that the difference between profit and loss in any organization depends on how well it utilizes its assets. This was also reiterated in the study by Safiq et al (2020) who argued that when properties of firms are idle or not generating enough cash flows, it could have an impact on the value and financial health of the business.…”

Pengaruh Profitabilitas, Sales Growth, dan Operating Cash Flow terhadap Financial Distress (Studi Empiris pada Perusahaan Manufaktur Subsektor Food & Beverage yang Terdaftar di Bursa Efek Indonesia Periode 2019-2021)

“…Studi empiris pada perusahaan manufaktur subsektor Food & beverage yang terdaftar di BEI periode 2019-2021 menunjukkan bahwa profitabilitas, pertumbuhan penjualan, dan arus kas operasional memiliki pengaruh signifikan terhadap financial distress (Nasution & Dinarjito, 2023). Penelitian lain juga menunjukkan bahwa variabel ROA dapat memprediksi tingkat financial distress suatu perusahaan (Safiq et al, 2020). Dapat disimpulkan bahwa profitabilitas, pertumbuhan penjualan, dan arus kas operasional memiliki peran yang signifikan dalam mempengaruhi tingkat financial distress pada perusahaan manufaktur subsektor Food & beverage yang terdaftar di BEI periode 2019-2021.…”