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The role of leverage and stock-based variables in the prediction of cash flows and earnings - some evidence from India

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  • Santanu Das

Abstract

One of the objectives of accounting reporting system is to provide the analysts a true picture of the firm's financial position. Recognising this importance, the International Accounting Standards Board has prescribed IAS 7 (cash flow statement). Many studies have been carried out to assess the usefulness of cash flows in the prediction of future cash flows or more specifically profitability. This paper focuses on some other determinants of future profitability apart from the components of net income. It finds that the debt-equity ratio of a firm is also a deciding factor among the accrual components and past earnings.

Suggested Citation

  • Santanu Das, 2012. "The role of leverage and stock-based variables in the prediction of cash flows and earnings - some evidence from India," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 3(1), pages 1-14.
    • Handle: RePEc:ids:afasfa:v:3:y:2012:i:1:p:1-14
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    References listed on IDEAS

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    1. Myungsun Kim & William Kross, 2005. "The Ability of Earnings to Predict Future Operating Cash Flows Has Been Increasing—Not Decreasing," Journal of Accounting Research, Wiley Blackwell, vol. 43(5), pages 753-780, December.
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    4. Nelson, Karen K. & Barth, Mary E. & Cram, Donald, 2001. "Accruals and the Prediction of Future Cash Flows," Research Papers 1594r, Stanford University, Graduate School of Business.
    5. Ball, R & Brown, P, 1968. "Empirical Evaluation Of Accounting Income Numbers," Journal of Accounting Research, Wiley Blackwell, vol. 6(2), pages 159-178.
    6. Gregory Kane & Frederick Richardson & Uma Velury, 2006. "The Relevance of Stock and Flow-Based Reporting Information In Assessing the Likelihood of Emergence from Corporate Financial Distress," Review of Quantitative Finance and Accounting, Springer, vol. 26(1), pages 5-22, February.
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    Cited by:

    1. De Andrés Fazio, Salvador & Urquía Grande, Elena & Pérez Estébanez, Raquel, 2022. "The “secret life” of the Statement of Cash Flow: A bibliometric analysis," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).

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