Based On The Forecast The Future Cash Flow Of Real Estate Industry Earnings Quality Research

In this paper, we studied the earnings quality from the aspect of future cash flow based on the problem in decision-making. We compared the different predictive ability of the overall earnings and the constituent part after the decomposing of the overall earnings by empirical methods. At last, we got the conclusions and the relevant suggestions about the earnings quality basing on the future cash flow.Firstly, according to the research ideas and needs of this article, we reviewed the relevant literature from the following four aspects:the information content of accounting earnings, earnings management, earnings quality under new accounting standards and the characteristics of earnings quality. Then combined with the direction of this study as well as China’s national conditions, we made our evaluation. Secondly, we defined the concept of earnings and earnings quality in our article. Earnings refer to the accounting earnings and earnings quality is limited to the aspect of capabilities in supporting the future cash flow. Then we decomposed the overall earnings into constituent part on the basis of relevant theory and the structure of financial report. Thirdly, from the "functional fixation" and the "company with low earnings quality expels company with high earnings quality", we presented the problems of earnings quality in the decision-making. These are the basis of the follow-up study and our suggestions. Fourthly, we proposed two assumptions and four models to study the predictive capability of overall earnings and the constituent part of the overall earnings in predicting the future cash flow. Finally, based on the empirical findings, we made corresponding analysis from the horizontal decomposition, vertical decomposition and comprehensive comparison. We gave advice respectively to the real estate enterprises on improving earnings quality and investors on distinguishing companies with different earnings quality.