Download or read book Value Relevance of Earnings and Cash Flows from Operations written by Mohamed Rafik BEN AYED and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study is to examine the information content of accounting earnings and CFO to explain security returns in Tunisian Stock Exchange through the study of their response coefficients and the explanatory power of regression models in the period of 1997 - 2001 (an application of a New Accounting System of Companies). We hypothesis that (i) earnings (CFO) have an incremental information content beyond CFO (earnings) when the two variables are jointly used in return regression, (ii) the response of returns to CFO (earnings) increases (decreases) when earnings is transitory, (iii) security returns response to both earnings and (CFO) will be higher (lower) for high (low) growth firms and (iv) the security returns response to accounting earnings (CFO) are weaker (higher) for large (small) firms. We have introduced market-to-book ratio and market value of equity as additional variables in regression models and as proxies of growth and firm size. Results can not affirm that CFO plays a more important role in marketplace when earnings are transitory. Results in relation to earnings growth and firm size hypothesis show that CFO can join Market-to-Book ratio and market value of equity as proxy of risk.

Download or read book Accounting Cash Flow and Value Relevance written by Francesco Paolone and published by Springer Nature. This book was released on 2020-07-29 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although the concept “Cash is King” is today widely recognized, the cash flow statement was rather neglected until the EU accounting regulators discovered its relevance in explaining the real value of the business. This book investigates the value relevance of the operating cash flow as reported under the International Financial Reporting Standards (IAS/IFRS) for the largest European listed companies and US listed companies in the past recent years. Using the model based on the valuation theory developed by Ohlson, which measures the market value of equity as a function of accounting variables, the author concludes that operating cash flow represents a significant variable in determining the value relevance of the largest European and US listed companies. These findings provide siginificant implications for standard setters and support the continued requirements for disclosure of cash flow information under IAS 7.

Download or read book Which is More Value Relevant written by Ervin L. Black and published by . This book was released on 1998 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Statements in the financial press and recent research suggest that controversy exists as to which accounting measure is more value-relevant: earnings or cash flows. This study examines the relative value-relevance of earnings and cash flow measures in the context of the firm life-cycle. Earnings are predicted to be more value-relevant in mature stages. Cash flows are expected to be more value relevant in stages characterized by growth and/or uncertainty. In general the hypotheses are supported using Wald chi-square tests (Biddle, Seow, and Siegel 1995) of the Edwards, Bell, Ohlson (1995) model. Evidence supports the hypothesis that earnings are more value-relevant than operating, investing, or financing cash flows in mature life-cycle stages. However, in the start-up stage investing cash flows are more value relevant than earnings. In growth and decline stages, operating cash flows are more value relevant than earnings.

Download or read book Real Earnings Management and the Relevance of Operating Cash Flows written by Saoussen Boujelben and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The primary focus of this study is to investigate whether the level of earnings management through real activities (REM)affects the value relevance of reported cash flows from operations (CFO), precisely with regard to their ability to predict futureCFOs. Using the data related to CAC all tradable listed French firms during 2008 through 2015, we provide evidence whichsupports the expected decrease in value relevance of reported CFO for future CFOs' prediction in the presence of REM. Ourfinding highlights the fact that if managers decide to manipulate upward earnings through operating activities, they couldadversely affect the information content of CFOs. More precisely, an aggressive deviation from normal activities leads toabnormal levels of the main operating inflows and outflows in an inconsistent way and this deteriorates the value relevanceof cash flows from operations. This contribution is of use for creditors and investors and other key CFO users for predictionpurposes as it urges them to make necessary adjustments when predicting the future ability of an entity to generate cash flows.

Download or read book The Political Economy of Accounting Reform in Developing Countries written by Andrew Rosser and published by . This book was released on 1999 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Value Relevance of Cash Flows and Accruals written by Krishna R. Kumar and published by . This book was released on 2008 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the role of investment opportunities as a determinant of the relative importance of cash flows from operations (CFO) and accruals in firm valuation. We find that at low investment-opportunity levels, CFO value-relevance increases with investment opportunities. When investment opportunities are high, accrual value-relevance declines as investment opportunities increase. Consequently, earnings value-relevance first varies directly and then inversely with investment opportunities. We show that the increase in CFO value-relevance is consistent with cost differentials between internal and external financing causing CFO to be an increasingly important determinant of the realization of investment opportunities. The decline in accrual value-relevance at high investment-opportunity levels appears to be attributable to accounting measurement deficiencies.

Download or read book Comparative Value Relevance of GAAP IBES S P Core Cash Earnings and Cash Flows written by Dominic Gasbarro and published by . This book was released on 2013 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the impact the global financial crisis had on the value relevance of GAAP and non-GAAP earnings. We adopt the Ohlson (1995) valuation and CAR models to test the value relevance and information content of alternative earnings measures. We use six different earnings measures comprising IBES earnings, Standard & Poor's (S&P) core earnings, cash earnings, cash flows from operations, earnings from operations adjusted to exclude special items under GAAP and income before extraordinary items under GAAP. We draw our sample from US publicly traded firms between 2002 and 2010. Our sample is partitioned into Financial and non-Financial firms, and S&P 500 and non-S&P 500 firms. The results show that investors place greater value relevance on GAAP earnings during the GFC period relative to the pre-GFC period.

Download or read book Value Relevance of Accounting Earnings and the Information Content of its Components written by Mohamed Rafik BEN AYED and published by . This book was released on 2006 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to examine the value relevance of accounting earnings and its components for firm valuation in Tunisian Stock Exchange. We have tested three hypotheses relatives to the value relevance of alternative accounting measures and to the effect of the decomposition of this variable on its explanatory power. Empirical evidence showed on one hand, that operating income, income before taxes, special items and income taxes are value relevant for firm valuation and on the other hand, cash flow from operations and accruals are not value relevant.

Download or read book Value Relevance of Book Value and Earnings written by Mohd Halim Kadri and published by . This book was released on 2016 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study aimed at investigating the value relevance of book value and earnings and the relationship between earnings and operating cash flow of two different financial reporting regimes in Malaysia. A market and non-market valuation approaches were utilised for that purpose. The result of market valuation approach of pool sample shows that book values and earnings are value relevant. We also observed that the change in financial reporting regime affects significantly the value relevance of book value and but not earnings. While book value and earnings are value relevant during the MASB period, only book value is value relevance during the FRS period. The result of non-market valuation approach on the other hand, shows that the change in financial reporting regime has no significant effect on the relationship between earnings and operating cash flow. The result of market valuation approach implicates that the introduction of new or improved standards under FRS regime strengthen the position of book value thus leaving earnings behind in equity valuation. The result of non-market valuation model implicates that the level of relationship between earnings and operating cash flow persists as long as operating cash flow comprise of cash and cash equivalent components whereas earnings comprise of cash and accruals components. The study contributes to the existing literature in the area of the effect of adoption of FRS on value relevance of accounting numbers in Malaysia.

Download or read book Information Asymmetries and the Value relevance of Cash Flow and Accounting Figures written by Marc Steffen Rapp and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: While some of the modern performance measures used in managerial accounting rely on cash flow based figures others try to take advantage of the information content of accounting figures. However, whether the additional information content in the accrual components of earnings improves the internal performance measurement is an open empirical question. To shed light on this question, I examine the correlation between operating cash flows and earnings with firm's total shareholder returns. Using fixed firm effects regression methods for a large sample of German listed firms covering some 5,000 firm years, the analysis shows that generally operating cash flow and earnings are both positively correlated with total shareholder return. However, with increasing information asymmetry earnings become less correlated with the firm's stock market performance and operating cash flows dominate earnings in explaining total shareholder return (and vice versa). These results suggest that, the information content of accounting figures is only relevant in settings characterized by low information asymmetries and, thus, there is no one-size-fits-all performance measure for managerial accounting purposes. -- Accounting figures ; performance measures ; total shareholder return ; managerial accounting

Download or read book The Value Relevance of Earnings Cash Flow and Accruals written by and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Informational Role and Value Relevance of Earnings Cash Flows and Accruals written by David J. Ashton and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we establish a theoretical relationship between earnings components and future stock returns. It shows the informational role of earnings, cash flows and accruals in predicting future stock returns and the key role played by the earnings response coefficient. It also suggests that the 'accrual anomaly' can be explained rationally. Accounting fundamentals jointly determine the covariance risk between uncertain future cash flows and the discount factor: accruals are encompassed as long as there exists differential persistence between cash flows and accruals after controlling for aggregate earnings. In particular, it is the deviation of (scaled) accruals from their long run mean rate that is vital in explaining the 'accrual anomaly'. Consequently, Sloan (1996) and similar results should not be interpreted as an accrual-based anomaly, instead they document important evidence of the possible fair pricing of accruals.

Download or read book Accounting for Value written by Stephen Penman and published by Columbia University Press. This book was released on 2010-12-30 with total page 265 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting for Value teaches investors and analysts how to handle accounting in evaluating equity investments. The book's novel approach shows that valuation and accounting are much the same: valuation is actually a matter of accounting for value. Laying aside many of the tools of modern finance the cost-of-capital, the CAPM, and discounted cash flow analysis Stephen Penman returns to the common-sense principles that have long guided fundamental investing: price is what you pay but value is what you get; the risk in investing is the risk of paying too much; anchor on what you know rather than speculation; and beware of paying too much for speculative growth. Penman puts these ideas in touch with the quantification supplied by accounting, producing practical tools for the intelligent investor. Accounting for value provides protection from paying too much for a stock and clues the investor in to the likely return from buying growth. Strikingly, the analysis finesses the need to calculate a "cost-of-capital," which often frustrates the application of modern valuation techniques. Accounting for value recasts "value" versus "growth" investing and explains such curiosities as why earnings-to-price and book-to-price ratios predict stock returns. By the end of the book, Penman has the intelligent investor thinking like an intelligent accountant, better equipped to handle the bubbles and crashes of our time. For accounting regulators, Penman also prescribes a formula for intelligent accounting reform, engaging with such controversial issues as fair value accounting.

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.

Download or read book How to Manage Profit and Cash Flow written by John A. Tracy and published by John Wiley & Sons. This book was released on 2004-09-23 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Finally, a book that provides invaluable hands-on financial and accounting concepts for use by the thousands of frontline business owners and managers battling for survival each and every day. While 'Wall Street' gets the headlines, 'Main Street' gets the job done." -Robert Svet, CEO, President, & Founder, The Eastridge Group of Staffing Companies "In today's competitive business environment, decisions must be made in a quick, reliable, and confident manner. This book provides CEOs, business owners, and managers clear, concise, and easy-to-understand business financial management concepts to make these types of value-added business decisions." -John Atencio, President & Founder, John Atencio Jewelry How to Manage Profit and Cash Flow provides streetwise advice and practical strategies for business managers and other professionals who need to make critical business decisions. From methods for analyzing past and future profit and cash flow information to differences between massaging the numbers and cooking the books, short, to-the-point chapters that are visually appealing will help you see through opaque accounting terminology and allow you to gain a firm grip on how to manage profit and cash flow in your business. Through three comprehensive sections: "Birthing a Business," "Building a Business," and "Selling or Burying a Business," as well as an Accounting and Financial Glossary, How to Manage Profit and Cash Flow discusses key issues, including: * Investing in assets * Preventing fraud * Handling taxes * Raising capital * Finding cash for growth * Terminating a business

Download or read book Principles of Accounting Volume 1 Financial Accounting written by Mitchell Franklin and published by . This book was released on 2019-04-11 with total page 1056 pages. Available in PDF, EPUB and Kindle. Book excerpt: The text and images in this book are in grayscale. A hardback color version is available. Search for ISBN 9781680922929. Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today's college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the "why" as well as the "how" aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

Download or read book Valuation Approaches and Metrics written by Aswath Damodaran and published by Now Publishers Inc. This book was released on 2005 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.