The investigation of the ability of current accounting data in Predicting Future Cash Flows

Subject Areas : Management Accounting

پیمان امینی ¹ , کامران محمدی ² , عباس افلاطونی ³

1 - ندارد
2 - ندارد
3 - ندارد

Received: 2010-08-27 Accepted : 2010-10-24 Published : 2010-09-23

Keywords: Earning, Cash flows, accruals, Future Cash Flows,

Abstract :

Cash flow prediction is an important purposes of financial reporting, becauseprovide important information for internal and external users. Most researchersbelieve that accounting data can be used to predicting future cash flows.In this paper we Study the ability of earning, cash flows, and accruals to predictingfuture cash flows. In order to study the predictive ability of used models, Pearsoncorrelation, and regression pooling data has been used.The results show that current cash flow alone has superiority in predicting future cashflow than current earnings alone and Also, disaggregation of earnings into cash flowand accruals as well as adding accrual components to the model which alreadycontains accruals data implicitly in the form of earnings generate superior explanatorypower with regard to future cash flow.Finally, adding short term accruals (change in accounts receivable, change in accountspayable and change in inventory) in compare with long term accruals (depreciationand amortization) to the earnings-based model, lead to increase higher the ability ofpredictive future cash flows