Accruals and the prediction of future operating cash-flows: evidence from Tunisian companies
Keywords:Earnings, Accruals, Operating Cash Flow, Prediction, Future Cash Flow.
The purpose of this study is to investigate the ability of earnings and its components to predict future cash flows for Tunisian companies. We provide evidence on the ability of aggregate earnings, accruals and its components to forecast one or two-period ahead cash flows.
The results of the models show that disaggregating earnings into cash flows and total accruals enhance the predictive ability of earnings relative to aggregate earnings. Furthermore, consistent with prediction, the disaggregating total ac-cruals into its major components (change in accounts receivable; change in inventory; change in accountantâ€™s payable, amortization, and other accruals) significantly enhances the predictive ability of earnings. Each accruals componentâ€™s proves a significantly power to predict future cash flows.
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