Open AccessRelative Ability of Earnings Data and Cash Flow in Predicting Future Cash Flows
Author(s) -
Nasrollah Takhtaei,
Hossein Karimi
Publication year - 2013
Publication title -
international journal of accounting and financial reporting
Language(s) - English
Resource type - Journals
ISSN - 2162-3082
DOI - 10.5296/ijafr.v3i1.3803
Subject(s) - cash flow , operating cash flow , cash on cash return , earnings , cash flow forecasting , cash flow statement , depreciation (economics) , stock exchange , business , cash management , population , cash and cash equivalents , econometrics , economics , finance , human capital , financial capital , demography , capital formation , sociology , economic growth
The purpose of this study is to examine earnings relative ability, operational cash flow, and two traditional measures of cash flows namely net earnings plus depreciation and operational working capital in predicting future cash flows. Also, the effect of company size on ability of predictive measures mentioned is examined in this study. The population examined includes accepted companies in Tehran Stock Exchange during period from 2005 to 2009. The results indicate that net earnings have more ability than operational cash flows and its traditional proxies in predicting the cash flows future. These findings are consistent with Financial Accounting Standards Board (FASB) claim based on earnings in preference on cash flows in predicting future cash flows.