THE STATEMENT OF CASH FLOWS AND ITS CONTRIBUTION TO A BETTER INFORMED DECISION MAKING
DOI:
https://doi.org/10.4270/ruc.20128Keywords:
Statement of Cash Flows, Financial information, Discriminant analysis.Abstract
In the current context of uncertainty in which we live, a company’s cash flow is one of the main concerns of its managers. Thus, the information showed in the Statement of Cash Flows is considered of utmost importance. In this sense, and following Barac (2010), the main goal of this study is to compare the financial information using ratios calculated from data prepared based on the assumptions of cash accounting and accrual accounting. The data was collected from the Annual Reports of 82 companies included in the sample selected, and concerns the period from 2005 to 2009. The study results show the importance of using the Statement of Cash Flows together with the other financial statements for a better decision making. Through the factorial and discriminant analysis, it was found out that both models based on accrual or cash flow ratios were able to achieve a classifying effectiveness. Therefore, it can be concluded that both models are useful to preview the future situation of a company’s classification.
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