A Study On Manipulation And Control Of Operating Cash Flow

Cash flow in good operation for the company,like well-circulated blood in the human body,maintains the healthy operation and development of the company.The operational cash flow in the company can reflect its debt-paying ability,a key reference for the corporate leaders following the business condition and for investors' decision-making,for supervision department collecting related information.Recently,IPO Committee and CSRC(China Securities Regulatory Commission)required the brokerage firms attaching more importance to the cash flow in the companies for better understanding of the business condition accordingly;and the parties with related interest began to pay close attention to cash flow,like the companies themselves,the investors,the creditors,and the supervision departments.The Chinese companies generally prefer equity financing,in IPO or issuing additional stocks,or allotment of shares.After successful fund-raising,the enlisted companies might have problems of descending in achievements or insider dealings or others,among which the achievement descending aroused wide attention among scholars.It was found operational cash flow manipulation in studying the earnings management in the listed companies by Teah et al,Wenbin Lu,Xiao Wang and others.Li Chen found operational cash flow manipulation was common in enlisted companies with many sample studies although China issued normative documents on operational cash flow.Therefore,the research on operational cash flow is necessary.The author,in combined study of theories and cases,analyzed the problems in operational cash flow in detail in three steps: question raising,question analyzing and question solving.Firstly,the author had preliminary understanding theoretically by elaborating the current condition of operational cash flow overseas and domestic,the importance of operational cash flow,the manipulation motive,the manipulation method and anti-manipulation measures after reading and summarizing many documents in the field.Then a case study was carried out in Liangchuang Energy-saving for further study in accelerating accounts receivable and postponing accounts payable,manipulating the operational cash flow in several methods,like adjusting the cash flow with government subsidiaries,taking advantage of accounting standard,and making up business dealings.The manipulation methods analysis was qualitative and quantificational with reference to theories.The research result turned out that the enlisted companies,carrying out earnings management for satisfying capital market,inevitably manipulate the operational cash flow.In such condition,the investors have to pay attention to the financial index,the off-balance sheet,the foot-notes to financial statements,and its variation tendency in the past 3 years besides the careful study of the financial statement of the reporting period.At the same time,the supervision departments have to strengthen the supervising and improve the law system related.