Analysts' Cash Flow Forecasts and the Predictive Ability and Pricing of Operating Cash Flows

2008 ◽  
Author(s):  
Andrew C. Call
Keyword(s):  
Cash Flow ◽  
Predictive Ability ◽  
Cash Flows ◽  
Operating Cash Flows ◽  
Cash Flow Forecasts

The Effects of Financial Statement and Informational Complexity on Analysts’ Cash Flow Forecasts

2008 ◽  
Vol 83 (4) ◽  
pp. 915-956 ◽  
Author(s):  
Leslie Hodder ◽  
Patrick E. Hopkins ◽  
David A. Wood
Keyword(s):  
Cash Flow ◽  
Forecast Error ◽  
Cash Flows ◽  
Net Income ◽  
Indirect Approach ◽  
Operating Cash Flows ◽  
Cash Flow Forecasts ◽  
Statement Of Cash Flows ◽  
Mixed Pattern ◽  
Cash Flow Forecast

ABSTRACT: We characterize the operating-activities section of the indirect-approach statement of cash flows as backward because it presents reconciling adjustments in a way that is opposite from the intuitively appealing, future-oriented, Conceptual Framework definitions of assets, liabilities, and the accruals process. We propose that the reversed-accruals orientation required in the currently mandated indirect-approach statement of cash flows is unnecessarily complex, causing information-processing problems that result in increased cash flow forecast error and dispersion. We also predict that the mixed pattern (i.e., +/−, −/+) of operating cash flows and operating accruals reported by most companies impedes investors’ ability to learn the time-series properties of cash flows and accruals. We conduct a carefully controlled experiment and find that (1) cash flow forecasts have lower forecast error and dispersion when the indirect-approach statement of cash flows starts with operating cash flows and adds changes in accruals to arrive at net income and (2) cash flow forecasts have lower forecast error and dispersion when the cash flows and accruals are of the same sign (i.e., +/+, −/−); with the sign-based difference attenuated in the forward-oriented statement of cash flows. We also conduct a quasi-experiment to test our mixed-sign versus same-sign hypotheses using archival samples of publicly available I/B/E/S and Value Line cash flow forecasts. We find that the passively observed samples of cash flow forecasts exhibit a similar pattern of mixed-sign versus same-sign forecast error as documented in our experiment.

scholarly journals Foreign Monitoring and Predictability of Future Cash Flow

2019 ◽  
Vol 11 (18) ◽  
pp. 4832
Author(s):  
Jaehong Lee ◽  
Eunsoo Kim
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
Predictive Ability ◽  
Financial Statements ◽  
Cash Flows ◽  
Foreign Investors ◽  
Future Cash Flow ◽  
Flow Components ◽  
Future Cash Flows

A company’s sustainability is generally determined by whether it is able to create a positive long-term cash flow. This paper investigates whether the predictive ability of cash flows and earnings in forecasting future cash flows differs depending on the foreign investors’ ownership. Based on firms listed in the Korea Stock Exchange market from 2000 to 2017, we find that earnings and cash flow components of financial statements enhance the predictability of future cash flow in the Korean stock market. Conversely, foreign investors showed a tendency to decide on investments based on operating cash flow instead of earnings when predicting future cash flow. These findings indicate that reliability towards earnings may fall since foreign investors’ concerns are on the prospects of earnings management. These results were strengthened by the addition of several more analyses including cluster analyses, consideration of information asymmetry and the chaebol governance.

Sources of origin of operating cash flows in Polish listed companies

2017 ◽  
Vol 45 (4) ◽  
pp. 69-76
Author(s):  
Edyta Mioduchowska-Jaroszewicz
Keyword(s):  
Cash Flow ◽  
Capital Market ◽  
Intangible Assets ◽  
Listed Companies ◽  
Cash Flows ◽  
Investment Expenditure ◽  
Research Hypothesis ◽  
Operating Cash Flows

The aim of the article was to conduct a research on the origin of operating cash flows in Polish listed companies. The main objective of the article was to investigate the level of depreciation and its use in the operating cash flows of companies operating on the Polish capital market. The first was to examine and analyse that depreciation is the main source of the cash flow from businesses. The second hypothesis was a complement to the first hypothesis and concerned the examination of whether 100% of the depreciation was transferred to the investment expenditure. The results of the study presented in the article on depreciation in operating cash flows as the main source of operating cash have been positively confirmed. The average depreciation level ranges from 31% to 47%. The rela-tionship between investment expenditures and depreciation was also examined. Research shows that depreciation is wholly attributable to investment expenditures related to the acquisition of property, plant and equipment and intangible assets, or its value exceeds expenditure. This situation positively confirms the second research hypothesis that depre-ciation is used as investment expenditure.

Arborista, Inc.: An Instructional Resource Case

2013 ◽  
Vol 28 (3) ◽  
pp. 681-690 ◽  
Author(s):  
Marc P. Picconi ◽  
Kimberly J. Smith ◽  
Alexander Woods
Keyword(s):  
Cash Flow ◽  
Direct Method ◽  
Cash Flows ◽  
Integrated System ◽  
Net Income ◽  
Managerial Accounting ◽  
Early Integration ◽  
Operating Cash Flows ◽  
Cash Flow Statement ◽  
Statement Of Cash Flows

ABSTRACT: This deceptively simple case is intended for use as early as the first day of an M.B.A. core accounting course or as a focused review for an undergraduate accounting course. It achieves three primary objectives: accelerating student learning about the statement of cash flows, emphasizing the importance of both the cash flow statement and the income statement in valuation and capital markets, and introducing the three primary financial statements as an integrated system. The case also features the use of the direct method of presenting operating cash flows, both as a pedagogical tool and to allow interested instructors to increase their focus on that method. We have found that students benefit from the early integration of the cash flow statement, as well as the ability to clearly understand how operating cash flows are similar to—and different from—net income. Finally, the case provides an optional managerial accounting module for instructors who teach a course that integrates financial and managerial accounting.

scholarly journals Do Managers Manage Cash Flows in Reaction on Analysts’ Cash Flow Forecasts?

2017 ◽  
Vol null (71) ◽  
pp. 1-32
Author(s):  
심준용 ◽  
윤용석 ◽  
ChoiWooseok
Keyword(s):  
Cash Flow ◽  
Cash Flows ◽  
Cash Flow Forecasts

scholarly journals Outsider Estimation of the Fair Value of Bank Stocks: Computational and Conceptual Issues

2003 ◽  
Author(s):  
Mohamed Ariff ◽  
Lina Suranto
Keyword(s):  
Cash Flow ◽  
Poor Performance ◽  
Fair Value ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Market Values ◽  
Operating Cash Flows ◽  
Operating Cash Flow ◽  
Better Than ◽  
Naive Model

This paper attempts to fill a void in the finance literature by reporting the reliability of theoretical valuation models against the market values of banking corporations. The dividend, operating cash flows and the free cash flow valuation approaches are operationalised to estimate fair values of banks. These values are then compared with market values. This results, using the Theil’s U-coefficient, show that the operating cash flow approach provides estimates that are better than the naïve model estimates. The other two approaches produced results no better than the naïve model. A probable reason for the poor performance of the free cash flow approach is suggested. Outsider’s estimation of investment values needed for free cash flow calculation is likely to introduce serious errors irrespective of the theoretical bases of models widely used in the industry.  

scholarly journals Net Operating Working Capital, Capital Budgeting, And Cash Budgets: A Teaching Example

2016 ◽  
Vol 9 (1) ◽  
pp. 31-38 ◽  
Author(s):  
James A. Turner
Keyword(s):  
Student Satisfaction ◽  
Cash Flow ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Net Income ◽  
Working Capital ◽  
Accrual Accounting ◽  
Operating Cash Flows ◽  
Present Information ◽  
Budgeting Process

Many introductory finance texts present information on the capital budgeting process, including estimation of project cash flows.  Typically, estimation of project cash flows begins with a calculation of net income.  Getting from net income to cash flows requires accounting for non-cash items such as depreciation.  Also important is the effect of changes in net operating working capital on cash flow.  While students readily understand how to account for depreciation when calculating cash flow, they typically have much more difficulty understanding how and why changes in working capital affect cash flows.  This paper develops a teaching example to show exactly how and why changes in net operating working capital affect cash flows.  The example shows how to derive operating cash flows for a proposed project using the accrual accounting method and then shows a cash budget for the same project.  Finally, the example shows that the discrepancy between the cash flows shown in the cash budget and the operating cash flows can be resolved by accounting for changes in working capital.  A survey of students in an MBA managerial finance course indicates student satisfaction with the teaching example and gives evidence that students prefer the teaching example to explanations of the effect of working capital on project cash flows given in the assigned text.

scholarly journals Earnings and cash flow persistence: Case of medium agriculture enterprises in Serbia

2021 ◽  
Vol 68 (1) ◽  
pp. 141-153
Author(s):  
Slavica Stevanović ◽  
Jelena Minović ◽  
Grozdana Marinković
Keyword(s):  
Economic Growth ◽  
Regression Analysis ◽  
Cash Flow ◽  
National Economy ◽  
Earnings Quality ◽  
Cash Flows ◽  
Annual Data ◽  
Panel Regression ◽  
Operating Profit ◽  
Operating Cash Flows

This paper examines the earnings and cash flow persistence of selected agriculture Serbian enterprises as a measure of their earnings quality. We study the persistence of income statements and cash flow statement items of medium-sized agriculture enterprises in Serbia. Agriculture is a relevant sector for the national economy and medium-sized enterprises are the main drivers of her economic growth. We use panel regression analysis with annual data over the period from 2010 to 2018. The results of our research indicate that earnings and cash flow-based indicators have different persistence. Analysing accruals and net cash flows of operating activities as determinants of operating profit of analysed enterprises, we conclude that operating profit that represents accruals are more persistent than operating profit backed by net operating cash flows.

scholarly journals The Effect of Leverage, Size, Liquidity, Operating Cash Flow on Fixed Asset Revaluation

2017 ◽  
Vol 7 (1) ◽  
pp. 31
Author(s):  
Dian Firmansyah ◽  
Nurmala Ahmar ◽  
JMV Mulyadi
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
Audit Fees ◽  
Fair Value ◽  
Cash Flows ◽  
Fixed Asset ◽  
Operating Cash Flows ◽  
Fixed Assets ◽  
Asean Countries ◽  
Tax Payments

This study tries to prove empirically the effect of leverage, size, liquidity and operating cash flows on the revaluation of fixed assets. It used a sample of all non-financial companies, which revalued assets in the periode of 2012-2015, at companies listed on Indonesia Stock Exchange with upward revaluation category. The analysis was done using Path analysis (PLS) without requiring classical assumption and normality test. The results show that leverage affects Asset revaluation, it proves that high leverage because the company to do revaluation of fixed assets, large companies tend to want to display earnings reports that are not too large to reduce their political costs, with asset revaluation, the value of depreciation is calculated Repeated and reduce the company's profit. Operating cash flows affect the revaluation of fixed assets on the grounds that the company requires funds to pay its obligations as well as in revaluation assets cost a great deal for the appraisal services, audit fees and final tax payments. Yet, liquidity has no effect on the revaluation of fixed assets, Within the last 4 years, the study found that users of the Asset revaluation model reporting in Other Comprehensive Income continue to grow and are expected to become financial statements that have superiority and good quality by reporting fair value. In the next research to add the number of variables on Asset revaluation, as well as expand the sample by involving the company revaluation and non revaluation. In addition, to examine the development of asset revaluation, especially in ASEAN countries related to the adoption of IFRS in the case of fixed asset revaluation.Keyword: Leverage, Size, Liquidity, Cash Flow from operation, and Revaluations Assets.

scholarly journals EFFECTS OF ASSET STRUCTURE, OPERATING CASH FLOW, AND PROFITABILITY ON DEBT POLICY IN PROPERTY AND REAL ESTATE COMPANIES ON THE INDONESIA STOCK EXCHANGE PERIOD 2013-2017

2018 ◽  
Vol 7 (01) ◽  
pp. 33
Author(s):  
Meilianta Br Peranginangin ◽  
Cathrin Mutiara Saragih ◽  
Hantono Hantono ◽  
Namira Ufrida Rahmi ◽  
Siti Tiffany Guci
Keyword(s):  
Linear Regression ◽  
Real Estate ◽  
Multiple Linear Regression ◽  
Cash Flow ◽  
Analytical Method ◽  
Stock Exchange ◽  
Cash Flows ◽  
Operating Cash Flows ◽  
Operating Cash Flow ◽  
Debt Policy

This study aims to determine the effect of asset structure, operating cash flow, and profitability on debt policy in property and real estate companies in the Indonesia Stock Exchange in 2013-2017. The analytical method used is multiple linear regression, F test and t test. The results of the analysis of this study indicate that the structure of assets, operating cash flows, and profitability have a simultaneous effect on debt policy. Meanwhile the analysis partially shows that the asset structure, operating cash flows, and profitability do not partially affect debt policy.

Sign in / Sign up

Export Citation Format

Share Document