engleski

Cash Flow Ratios vs. Accrual Ratios: Empirical Research on Incremental Information Content

The aim of this paper is to provide empirical evidence concerning the incremental information content of cash flow ratios and accrual ratios as company’s performance measure. The research hypothesis implies that cash flow ratios, based on the information from cash flow statement are less likely to be affected by possibilities of accounting manipulations than accrual ratios calculated from a balance sheet and income statement data. Therefore, the assessment of business performance based on cash flow ratios will provide more accurate and reliable information than the one based on accrual ratios. Verification of empirical evidence will be provided through the sample of Croatian listed companies, more precisely, their annual financial statements in succession from 2000 to 2006. All variables were based on relevant researches on a similar topic and chosen according to the possibility of their implementation in capital markets. The results of our study showed greater relevance of cash flow information and cash flow ratios in comparison with the balance sheet, income statement information and accrual ratios when judging company's financial performance.

cash flow ratios; accrual ratios; incremental information

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