Title: The role of leverage and stock-based variables in the prediction of cash flows and earnings – some evidence from India

Authors: Santanu Das

Addresses: Indian Institute of Information Technology, Deoghat, Jhalwa, Allahabad – 211012 (U.P.), India

Abstract: One of the objectives of accounting reporting system is to provide the analysts a true picture of the firm's financial position. Recognising this importance, the International Accounting Standards Board has prescribed IAS 7 (cash flow statement). Many studies have been carried out to assess the usefulness of cash flows in the prediction of future cash flows or more specifically profitability. This paper focuses on some other determinants of future profitability apart from the components of net income. It finds that the debt-equity ratio of a firm is also a deciding factor among the accrual components and past earnings.

Keywords: accruals; debt equity ratio; stock variables; leverage; India; cash flows; earnings; financial reporting; IAS 7; cash flow statements; cash flow prediction; cash flow forecasting; future profitability.

DOI: 10.1504/AAJFA.2012.046330

Afro-Asian Journal of Finance and Accounting, 2012 Vol.3 No.1, pp.1 - 14

Received: 21 Jul 2011
Accepted: 23 Sep 2011
Published online: 06 Apr 2013 *

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