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Earnings, accruals, cash flows, and EBITDA for agribusiness firms

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  • Carlos Omar Trejo-Pech
  • Richard N. Weldon
  • Lisa A. House
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    Abstract

    This study examines empirical relationships of earnings, accruals, and cash flows for the U.S. food supply chain sector (i.e., agribusiness) and compares them with results for the complete U.S. market. In addition, we evaluate earnings before interest, taxes, depreciation, and amortization (EBITDA) as a potential proxy for cash flow. Empirical results show that while earnings and accruals are systematically positively related, accruals and cash flows are systematically negatively related. Moreover, both the magnitude and the behavior of EBITDA across different levels of cash flows for agribusinesses do not mimic cash flows. Thus, this metric is not a valid proxy for cash flow in accrual research studies.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

    Volume (Year): 68 (2008)
    Issue (Month): 2 (September)
    Pages: 301-319

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    Handle: RePEc:eme:afrpps:v:68:y:2008:i:2:p:301-319

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    Web page: http://www.emeraldinsight.com

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    Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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    Related research

    Keywords: Accruals; Agribusiness; Cash flows; Earnings; EBITDA; Financial accounting;

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