An Empirical Examination of Cash Flow Measures

ANDREAS CHARITOU, EDWARD KETZ

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

In recent years in the United States and Canada, there has been an increasing interest in cash flow reporting and a strengthening belief that information on cash flows is valued in the marketplace. However, little research has been devoted to the issue. Regulatory bodies in the U.S. (Financial Accounting Standards Board) and Canada(Canadian Institute of Chartered Accountants) require that an enterprise should disclose separately cash flows from operating, financing and investing activities in their cash flow statements. The data in the cash flow statements are expected to help investors assess the firm's liquidity, financial flexibility and risk. On the other hand, the British Accounting Standards Committee (ASC) does not require a statement of cash flows. This study employs a cross‐sectional equity valuation model to examine the association of cash flows from operating, financing and investing activities with security prices. A sample of 403 U.S. firms is used for the ten‐year period of 1976–85. The results of this study indicate that there exists a strong association between the various cash flow components included in the cash flow statements and the market value of the firm.

Original languageEnglish (US)
Pages (from-to)51-64
Number of pages14
JournalAbacus
Volume27
Issue number1
DOIs
StatePublished - Mar 1991

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Cash flow
Canada
Financing
Investing
Market value
Accountants
Financial flexibility
Financial accounting standards
An enterprise
Investors
Valuation model
Financial risk
Security price
Accounting standards
Liquidity
Equity valuation

All Science Journal Classification (ASJC) codes

  • Accounting

Cite this

CHARITOU, ANDREAS ; KETZ, EDWARD. / An Empirical Examination of Cash Flow Measures. In: Abacus. 1991 ; Vol. 27, No. 1. pp. 51-64.
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An Empirical Examination of Cash Flow Measures. / CHARITOU, ANDREAS; KETZ, EDWARD.

In: Abacus, Vol. 27, No. 1, 03.1991, p. 51-64.

Research output: Contribution to journalArticle

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