THE ROLE OF CASH FLOWS AND ACCRUALS IN PREDICTING FUTURE CASH FLOWS

Abstract

In accounting, accrual of revenue and expenses are sufficient and it is not necessarily to be collected and paid because of the fact that accrual basis does not take into account the actualization time of cash flows in the recognition of earnings. It is expected that each component of accrual includes different information about future cash accruals due to the expectation of converting accruals into cash in future. Therefore, in this study, it is examined the roles of current cash flows and accruals in predicting future cash flows which is crucial for users of financial information to give the right decision, and it is tried to be determined which one provides more explanatory information. Consequently, it is seen that accruals and accrual disaggregation in next step have more explanatory power, and information content provided by components of accrual is consistent with the predictions.