Ability of Combinations of Cash Flow Components to Predict Financial Distress

Abstract

Abstract. The aim of this research is to provide a model that predicts company's financial distress on the basis of the operational, investment and financing components of its cash flow statement. To prevent bankruptcy and its negative consequences that among them are abuse of creditors, investors, management and employees' right, the prediction of financial distress and its probable consequence such as bankruptcy is essential. To serve this purpose, for the research 70 reliable firm-years and 70 distressed firm-years within the years 1995 to 2008 were selected from Tehran stock exchange. Considering the information that is reflected in the cash flow statement, the viability of financial distress prediction was examined. The result of chi-square test shows that there is significant difference in incidence rate of financial distress among the companies with different cash flow composition in one, two and three years before distress. In other words, the financial distress can be predicted on the basis of the contents and composition of the cash flow statement.Keywords: cash flow statement, cash flow composition, financial distress, bankruptcy, shortage of cash, operational activities, investment activities, financing activities. Įteikta 2011-02-05; priimta 2011-04-22 santrauka. Tyrimo tikslas -pateikti modelį, leidžiantį numatyti finansinius bendrovės sunkumus remiantis operatyvinės, investicinės ir finansinės veiklos pinigų srautais. Siekiant išvengti bankroto ir jo neigiamų padarinių, tarp jų piktnaudžiavimo kreditorių, investuotojų, vadovybės ir darbuotojų teisėmis, finansinių sunkumų ir galimų jų pasekmių, pavyzdžiui, bankroto, prognozavimas laikytinas itin reikšmingu uždaviniu. Siekiant užsibrėžto tikslo, tyrimui pasirinkta 1995-2008 m. 70 sėkmingai veikiančių ir 70 sunkumų patyrusių įmonių iš Teherano vertybinių popierių biržos. Atsižvelgiant į informaciją, kuri pateikta pinigų srautų ataskaitose, nagrinėjama finansinių sunkumų tikimybė. Chi kvadrato testo rezultatai rodo, kad įmonėse su skirtingos sudėties pinigų srautais pirmaisiais, antraisiais ir trečiaisiais tyrimo metais finansinių sunkumų tikimybė skiriasi. Kitaip tariant, finansiniai sunkumai gali būti numatyti remiantis pinigų srautų ataskaitų turiniu ir pinigų srautų struktūra. reikšminiai žodžiai: pinigų srautų ataskaita, pinigų srautų struktūra, finansiniai sunkumai, bankrotas, pinigų stygius (trūkumas), operatyvinė veikla, investicinė veikla, finansinė veikla.

Estimates Model of Factors Affecting Financial Distress: Evidence from Indonesian State-owned Enterprises

“…[9] found that bankruptcy is as a failure that occurs in a company that can be distinguished on the economic failures (economic distressed), and financial failure (financially distressed k. Janes [19] in his research on "Accruals, Financial Distress, And Debt Covenants" suggests that financial distress influenced by the performance of financial based on indicators of financial ratios. l. Kordestani et al [20] in his research on "Ability of Combinations of Cash Flow Components to Predict Financial Distress" suggests that financial distress influenced by the performance of financial-based on indicators of financial ratios. m. Elkamhi et al [21], in his research on "The cost of financial distress and the timing of default" suggests that financial distress influenced by financial and nonfinancial performance.…”

Corporate Governance Structures and Probability of Financial Distress: Evidence From Indonesia Manufacturing Companies

“…Some signs of financial difficulties include Increases in capital costs, more stringent requirements from creditors and suppliers for corporate financing, decreased cash flow, increased financial leverage and regular changes of key employees. These difficulties are caused by inefficient and ineffective operational system, deficiencies in market conditions such as recession and decline in market share and mismanagement of the company (Kordestani et al, 2011). Meanwhile, when the prediction of a company's financial distress is reliable, it provides a lot of benefits, such as the company managers taking corrective steps to avoid difficulties before bankruptcy occurs and investors understanding the profitability situation therefore, adjusting their investment strategies to reduce investment-related losses.…”

Analisis Model Altman, Taffler, Dan Zmijewski Dalam Memprediksi Perusahaan Yang Delisting Secara Paksa Karena Kegagalan Keuangan Dari Bursa Efek Indonesia Periode 2010-2014

“…Berikut tahapan kebangkrutan yang dialami oleh beberapa perusahaan (Kordestani et al 2011 Model Altman (1983) Model ini dikembangkan oleh Edward I Altman pada 1968. Altman sukses dalam memprediksi kebangkrutan perusahaan dengan menggunakan multiple discriminant analysis dengan tingkat akurasi mencapai 95%.…”