Relative Ability of Earnings Data and Cash Flow in Predicting Future Cash Flows

Takhtaei, Nasrollah; Karimi, Hossein

doi:10.5296/ijafr.v3i1.3803

Cited by 10 publications

(7 citation statements)

References 16 publications

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“…Working capital is valued as the company's ability to finance the company's operations by using capital owned by the company without funding from other parties. This research model uses the research model of Takhtaei and Karimi (2013) namely:…”

Section: Accrual Componentmentioning

confidence: 99%

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

Safiq

Selviana

Kusumastati³

2020

IJRBS

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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.

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Section: Accrual Componentmentioning

confidence: 99%

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

Safiq

Selviana

Kusumastati³

2020

IJRBS

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“…They play an essential role in managing debt and debt contracts and alone have a high capacity for predicting potential cash flows (Atqa et al, 2019). In a similar vein, Takhtaei and Karimi (2013) have found that net earnings have a better capacity than operational cash flows and conventional proxies for anticipating future cash flows. Since 1978, the Financial Accounting Standard Board (FASB) has mentioned estimating operating cash flows, emphasising that historical earnings interest investors more than historical cash flows for predicting potential cash flows (Nguyen & Nguyen, 2020).…”

Section: Historical Earnings and Future Cash Flowmentioning

confidence: 89%

Historical Earnings, Accrual Accounting, and Future Cash Flows: A Malaysian Perspective

Ali

Bashatweh³

et al. 2022

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This study investigates the influence of historical earnings and historical accrual accounting on projecting future cash flows. The sample consisted of 159 construction, energy, and property development companies from the main capital market of Malaysia. The compiled data of these companies spanned from 2015 to 2019 and was collected from the financial statements of the companies, including operating cash flows and earnings. The profit or loss statement and cash flow statement were used for calculating historic accrual accounting. Earnings, cash flow, and accrual accounting models were used as the basis for the regression model construction. The accounting data demonstrated that the prediction performance of the models was improved by the three-year lag. The previous two-year earnings and accrual accounting had positive and significant predictive power for forecasting future cash flows. Moreover, the past one- and two-year cash flows from operations significantly predicted future cash flows. These results are important for a sound understanding among academics and practitioners of the crux of historical earnings, operating cash flow, and accrual accounting. The findings can assist corporate leaders and management executives in tracking the sustainability and financial growth of an organization.

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“…Research that examines the effect of operating flow on stock returns which has no significant effect is the same as the research conducted by Takhtaei [13] because the highest and lowest values are between cash flow and stock returns in different companies. In terms of the effect of investment cash flow on stock returns, which has an insignificant effect in line with research conducted, Darmayanti [14] does not affect investment cash flow on the value of stock returns in manufacturing companies for the 2016-2018 period, an assessment of the average value of investment cash flows and stock returns that are not in sync.…”

Section: Effect Together (Silmutan)mentioning

confidence: 99%

Analysis of Cash Flow Components, Gross Profit, Earnings per Share on Stock Returns Manufacturing Company Listed in the Indonesian Stock Exchange from 2016 Until 2018

Azizah¹,

Muwidha²,

Magdalena³

2021

Proceedings of 2nd Annual Management, Business and Economic Conference (AMBEC 2020)

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The research objective was to determine the effect of cash flow components consisting of operating cash flow, investment cash flow, financing cash flow, gross profit, and earnings per share on stock returns. The population is the annual report of manufacturing companies listed on the Indonesia Stock Exchange for the period 2016-2018. Samples were taken of 32 company annual reports using purposive sampling method. Data collection using the documentation method. Data were analyzed using Multiple Linear Regression. The results of the operating cash flow analysis do not have a significant effect on stock returns. Investment cash flow has no significant effect on stock returns. Financial cash flow has no significant effect on stock returns and the results of gross profit analysis do not have a significant effect on stock returns. Meanwhile, earnings per share analysis has a significant effect on stock returns. Based on the results of the analysis, it can be concluded that the components of cash flow and gross profit are not reference variables for investors in making investment decisions and earnings per share are the main targets in making decisions. Therefore, companies must pay attention to earnings per share to attract investors.

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Relative Ability of Earnings Data and Cash Flow in Predicting Future Cash Flows

Cited by 10 publications

References 16 publications

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

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

Historical Earnings, Accrual Accounting, and Future Cash Flows: A Malaysian Perspective

Analysis of Cash Flow Components, Gross Profit, Earnings per Share on Stock Returns Manufacturing Company Listed in the Indonesian Stock Exchange from 2016 Until 2018

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