AN ANALYTIC STUDY ON EFFECT OF PREDICTIVE ABILITY OF ACCRUALS AND CASH FLOWS ON PREDICTED EARNINGS QUALITY

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MODARES A.; ABBASZADEH M.R.

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Journal: KNOWLEDGE AND DEVELOPMENT Year:2008 | Volume:15 | Issue:24 Page(s): 205-239

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Title

AN ANALYTIC STUDY ON EFFECT OF PREDICTIVE ABILITY OF ACCRUALS AND CASH FLOWS ON PREDICTED EARNINGS QUALITY

Author(s)

MODARES A. | ABBASZADEH M.R. | Issue Writer Certificate

Keywords

EARNING COMPONENTQ3

ACCRUAL ITEMSQ3

OPERATIONALQ3

CASH FLOWQ3

EARNING QUALITYQ3

EARNING PERSISTENCEQ3

Abstract

The purpose of this study is to investigate whether the EARNING COMPONENT accuracy in predicting themselves can lead into earning prediction and /or explain the earning durability and the relation between earning and CASH FLOWs .The research hypothesis suggest that there is a positive relationship between the prediction power of stronger accruals and current CASH FLOWs and the prediction of future earning and EARNING PERSISTENCE. The research results show that (1) it is possible to predict future' earnings with minimum errors based on previous earning report. Also, including either of cash or ACCRUAL ITEMS into the model improves the prediction. The results also indicate that (2) there is a positive relationship between the earnings function and prediction power of EARNING COMPONENTs and their stability .In other words, the EARNING COMPONENTs which enjoy more stability and/or high quality can predict earning in a more appropriate way .The finding of the study illuminated the fact that the effect of CASH FLOW item in prediction models is much more than the accrual item.This is in concordance with Sloan (1996) who believes that earning return ability which can be broken down into earning accrual item is less endurable than the CASH FLOW item: that is, items of CASH FLOW components of current earnings are more stable than the accrual components. Also, the results indicate that (3) CASH FLOWs are more powerful in predicting earnings so it is possible to predict CASH FLOWs based on earnings and vice versa.

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APA: Copy

MODARES, A., & ABBASZADEH, M.R.. (2008). AN ANALYTIC STUDY ON EFFECT OF PREDICTIVE ABILITY OF ACCRUALS AND CASH FLOWS ON PREDICTED EARNINGS QUALITY. KNOWLEDGE AND DEVELOPMENT, 15(24), 205-239. SID. https://sid.ir/paper/75739/en

Vancouver: Copy

MODARES A., ABBASZADEH M.R.. AN ANALYTIC STUDY ON EFFECT OF PREDICTIVE ABILITY OF ACCRUALS AND CASH FLOWS ON PREDICTED EARNINGS QUALITY. KNOWLEDGE AND DEVELOPMENT[Internet]. 2008;15(24):205-239. Available from: https://sid.ir/paper/75739/en

IEEE: Copy

A. MODARES, and M.R. ABBASZADEH, “AN ANALYTIC STUDY ON EFFECT OF PREDICTIVE ABILITY OF ACCRUALS AND CASH FLOWS ON PREDICTED EARNINGS QUALITY,” KNOWLEDGE AND DEVELOPMENT, vol. 15, no. 24, pp. 205–239, 2008, [Online]. Available: https://sid.ir/paper/75739/en

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