The Ability of Direct Cash Flow versus Indirect Cash Flow Method for Predict Future Operating Cash Flow

Subject Areas : Management Accounting

غلامرضا کردستانی ¹ (ندارد)
بهمن کولیوند ² (مسئول مکاتبات)
عباس زند عباس آبادی ³ (ندارد)

Received: 2011-04-06 Accepted : 2011-05-26 Published : 2011-09-23

Keywords: Cash Flow Statements, direct, indirect method, accruals,

Abstract :

Effect of method of providing cash flow resulting from operating activities (directand indirect methods)in power of predict future cash flows of the issues that a lot ofresearch has led the financial literature. Cash Flow Statements aim to provideinformation regarding the flow of incoming and outgoing cash during an accountingperiod. If the flow of funds that offers with information on other users of financialstatements should assist in these purposes to: (a) evaluate the company can create apositive future net cash flow evaluate the ability to participate in the confrontationcommitments and also requires the company to external financing, evaluate thecompany can pay the financing costs and dividends, Children understand thedifference and net operating profit company operating cash flows, determine theeffects of capital transactions Investment and Financing made during the company'sfinancial condition. The aim of this paper is a review of this issue 1) directlycompared the methods of indirect methods of calculating flow. Operating cash flowability to predict more are operating? 2) whether operating cash flow compared withits components is more useful for investors?According to survey results with data collected from companies listed in TehranStock Exchange during the period 1380 until 1388 showed that the cash flow ofinformation due to operational activities of the direct method predict more comparedwith indirect methods are entitled, and operating cash flow compared with itscomponents is more useful for investors.