Under accrual accounting, earnings add to shareholders' equity. Cash flow generated by a business has no effect on the book value of shareholders' equity but reduces the book value of net assets employed in business operations. In short, accrual accounting rules prescribe that earnings add to...

Cash flow statements have a longstanding history as mandated financial statement disclosures, having replaced funds flow statements. The usefulness of such disclosures with respect to one of the main purposes of financial statements - providing information relevant to the assessment of future...

We examine whether the components of accruals and operating cash flows improve the predictive ability of earnings for forecasting future cash flows. We exploit data from Australia where actual cash flow components had been reported. Thus, we avoid data estimation errors and sample self-selection...