Relationship Between Earnings and Cash Flow in Estimating Cash Flows: Evidence from Listed Nigerian Banks
Abstract
This study examines the relationship between earnings and cash flow in estimating future cash flows of firms in Nigeria. The source of data collection is secondary data source which comprises of twenty-one (21) commercial banks listed on the Nigerian Stock Exchange for the period of 2004-2013. The Ordinary Least Square technique was used in testing the hypothesis. The result of the analysis found a positive and significant relationship among future cash flows, past earnings, traditional measure of cash flows and current working capital of the observed firms. It was found that the obtained models were statistical adequate in estimating future cash flow of the firms. Hence, it was recommended among others that the regulatory authorities of accounting and capital market operations in Nigeria should encourage companies to set-up a cash flow system that will encourage the investing public to avail themselves of financial risk capable of jeopardizing their investment. This is expected to detail information on the financial performance of the company to enable investors make effective investment decisions.
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