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The Examination of the Ability of Earnings and Cash Flow in Predicting Future Cash Flows: Application to the Tunisian Context

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  • Olfa Ben Jemaa
  • Mohamed Toukabri
  • Faouzi Jilani

Abstract

This research aims to test the ability of accounting earnings versus cash flows to predict future cash flows in the Tunisian context. The study sample consists of 37 companies listed on the Tunisian financial market for the period 1998-2012. In this study, we provide evidence of the ability of accounting earnings and cash flows to predict cash flow for one and two subsequent years. The results show that for simple models whose variables of prediction is one or two years of delay, it is the operating cash flows that have the most interesting predictive capacity. However, for multi-year models, accounting earnings is most relevant in terms of predictive power of future cash flows.

Suggested Citation

  • Olfa Ben Jemaa & Mohamed Toukabri & Faouzi Jilani, 2015. "The Examination of the Ability of Earnings and Cash Flow in Predicting Future Cash Flows: Application to the Tunisian Context," Accounting and Finance Research, Sciedu Press, vol. 4(1), pages 1-1, February.
    • Handle: RePEc:jfr:afr111:v:4:y:2015:i:1:p:1
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    References listed on IDEAS

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    4. Ali, A, 1994. "The Incremental Information-Content Of Earnings, Working Capital From Operations, And Cash Flows," Journal of Accounting Research, Wiley Blackwell, vol. 32(1), pages 61-74.
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    6. Farshadfar, Shadi & Monem, Reza, 2013. "Further Evidence on the Usefulness of Direct Method Cash Flow Components for Forecasting Future Cash Flows," The International Journal of Accounting, Elsevier, vol. 48(1), pages 111-133.
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    Cited by:

    1. Mwila Joseph Mulenga & Meena Bhatia, 2017. "The Review of Literature on the Role of Earnings, Cash Flows and Accruals in Predicting of Future Cash Flow," Accounting and Finance Research, Sciedu Press, vol. 6(2), pages 1-59, May.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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