The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia

Purpose – The purpose of this thesis is to examine whether the free cash flow is related to earnings, dividends, depreciations, and capital expenditures. All these components have strong relationship with free cash flows in forecasting future cash flows for Malaysian companies. The general objective...

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Main Author:	Abdinassir, Ali Abdi
Format:	Thesis
Language:	eng eng
Published:	2012
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/3202/1/ABDINASSIR_ALI_ABDI.pdf https://etd.uum.edu.my/3202/2/ABDINASSIR_ALI_ABDI_12.pdf
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id	my-uum-etd.3202
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Amran, Noor Afza
topic	HG Finance
spellingShingle	HG Finance Abdinassir, Ali Abdi The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia
description	Purpose – The purpose of this thesis is to examine whether the free cash flow is related to earnings, dividends, depreciations, and capital expenditures. All these components have strong relationship with free cash flows in forecasting future cash flows for Malaysian companies. The general objective of this research study and central question is to investigate free cash flows affected by earnings, dividends, depreciations, capexs, and return on equity, return on asset, net income, net sales, and size of the firms in forecasting future cash flows in Malaysia. Design/methodology/approach - Using a sample of 100 companies listed on the main board of Bursa Malaysia between 2005 until 2010.The researcher apply the ordinary least squares and fixed-effects approaches to estimate their regression models. To evaluate the forecasting performance of the regression models, both within-sample and out-of-sample forecasting tests are employed. Findings – This study provided evidence that detailed cash flow from operations has more power in predicting future cash flows than earnings and traditional cash flow measures. Based on sample of 100 Malaysian Companies between 2005-2010 shows that independent variables and depreciation has strong relationship to dependable variable which is Free Cash Flows. The predictability of both earnings DPS, Capexs, depreciations have highly statistically significant to cash flows. The main findings based the results shows EBITDA is the highest affected of free cash flows while DPS is lowest affected by free cash flows. Originality/value –The value of this study indicates that EBITDA received much attention in corporate finance because EBITDA involves fewer components than cash flows making it easier to forecast. EBITDA differs from the operating cash flow in a cash flow statement primarily by excluding payments for taxes or interest as well as changes in working capital. EBITDA also differs from free cash flow because it excludes cash requirements for replacing capital assets (capex)
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Abdinassir, Ali Abdi
author_facet	Abdinassir, Ali Abdi
author_sort	Abdinassir, Ali Abdi
title	The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia
title_short	The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia
title_full	The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia
title_fullStr	The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia
title_full_unstemmed	The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia
title_sort	relative ability of earnings and cash flows data in forecasting future cash flows: evidence in malaysia
granting_institution	Universiti Utara Malaysia
granting_department	College of Business (COB)
publishDate	2012
url	https://etd.uum.edu.my/3202/1/ABDINASSIR_ALI_ABDI.pdf https://etd.uum.edu.my/3202/2/ABDINASSIR_ALI_ABDI_12.pdf
_version_	1747827520091193344
spelling	my-uum-etd.32022016-04-19T06:43:49Z The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia 2012 Abdinassir, Ali Abdi Amran, Noor Afza College of Business (COB) College of Business HG Finance Purpose – The purpose of this thesis is to examine whether the free cash flow is related to earnings, dividends, depreciations, and capital expenditures. All these components have strong relationship with free cash flows in forecasting future cash flows for Malaysian companies. The general objective of this research study and central question is to investigate free cash flows affected by earnings, dividends, depreciations, capexs, and return on equity, return on asset, net income, net sales, and size of the firms in forecasting future cash flows in Malaysia. Design/methodology/approach - Using a sample of 100 companies listed on the main board of Bursa Malaysia between 2005 until 2010.The researcher apply the ordinary least squares and fixed-effects approaches to estimate their regression models. To evaluate the forecasting performance of the regression models, both within-sample and out-of-sample forecasting tests are employed. Findings – This study provided evidence that detailed cash flow from operations has more power in predicting future cash flows than earnings and traditional cash flow measures. Based on sample of 100 Malaysian Companies between 2005-2010 shows that independent variables and depreciation has strong relationship to dependable variable which is Free Cash Flows. The predictability of both earnings DPS, Capexs, depreciations have highly statistically significant to cash flows. The main findings based the results shows EBITDA is the highest affected of free cash flows while DPS is lowest affected by free cash flows. Originality/value –The value of this study indicates that EBITDA received much attention in corporate finance because EBITDA involves fewer components than cash flows making it easier to forecast. EBITDA differs from the operating cash flow in a cash flow statement primarily by excluding payments for taxes or interest as well as changes in working capital. EBITDA also differs from free cash flow because it excludes cash requirements for replacing capital assets (capex) 2012 Thesis https://etd.uum.edu.my/3202/ https://etd.uum.edu.my/3202/1/ABDINASSIR_ALI_ABDI.pdf application/pdf eng validuser https://etd.uum.edu.my/3202/2/ABDINASSIR_ALI_ABDI_12.pdf application/pdf eng public masters masters Universiti Utara Malaysia Ali,A., & Hwang,L. (2000).Country-specific factors related to financial reporting and the value relevance of accounting data. Journal of Accounting Research, 38,1-21. Aulia,F.R., Norman,M.S. (2008). 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The Relative Ability of Earnings and Cash Flows Data in Forecasting Future Cash Flows: Evidence in Malaysia

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