Research On The Information Content Of Total Accruals And Cash Flow From Operations

Past research focuses on the information content of accounting earnings and cash flow or the information content and prediction ability of stock returns, cash flow and accruals. This research probes into the relationship between cash flow from operations(CFO) and total accruals(ACCR). Especially focuses on the project analysis after disassembling.I disassemble net income after tax to compare total accruals method with income respective method and use it to the regression model. And then, to understand its information content through the parameter statistics dominance level and coefficient correlation appeared, this study takes net income after tax, cash flow from operations and total accruals from the statement of cash flows. The number of total accruals is the difference between net income after tax and cash flow from operations as reported on the cash flow statement. The accrual categories are made up total accruals from the database. To arrive at NIATacc*, my method takes the individual accrual categories and estimates their effect on net income after tax. After NIATacc* is estimated, NIATcf* is derived by subtracting NIATacc* from net income after tax. WCCacc*and WCCcf* can be derived by subtracting NIATacc* and NIATcf* from total accruals and cash flow from operations, respectively. An important subtlety presented here is that there is a difference between the before tax and after tax effect of depreciation on the net income after tax of a company. This difference in the before tax and after tax effect of depreciation on earnings is important to my income perspective models since depreciation is larger accruals in total accruals. Researchers used total accruals as a dependent or independent variables all use depreciation before tax. Since this study is focused on earnings after tax, I estimate and use the after tax effect of depreciation on earnings. I also find that models can be affected if researchers use depreciation before tax in after tax study. In addition, I consider influence of amortization charge of total accruals, subdivide out Deprbt* in NIATacc*, Deprtax shield* and NIATacc-depr* three factors. Deprbt* and Deprtax shield* can be formed for Deprat*.Except focusing on the information content of accounting earnings and cash flow or the information content and the prediction ability of stock earnings, cash flow and accruals at present, can be from setting about related among the total accruals and cash flow from operating activity, and then is based on future earnings and abnormal returns. In addition, I quite analyze the influence caused among the composition key element of the total accruals and cash flow from operating activity progressively. Help investors to understand the impact of working capital changes and offer more broad information of the report form.This research provides evidence that regression models taking an income perspective by using estimates of total accruals method and cash flow from operations method impact on earnings as independent variables, along with depreciation, are more informative models for predicting year t + 1 earnings and year t abnormal returns. The income perspective models are most informative versus the total accruals models when...