Ability of combinations of cash flow components to predict financial distress
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...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Vilnius Gediminas Technical University
2011-09-01
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| Series: | Business: Theory and Practice |
| Subjects: | |
| Online Access: | https://journals.vgtu.lt/index.php/BTP/article/view/8698 |
| _version_ | 1827363897273745408 |
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| author | Gholamreza Kordestani Mehrdad Bakhtiari Vahid Biglari |
| author_facet | Gholamreza Kordestani Mehrdad Bakhtiari Vahid Biglari |
| author_sort | Gholamreza Kordestani |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-03-08T07:57:52Z |
| format | Article |
| id | doaj.art-8c5236cb78704b28a2ba7e646c54e94c |
| institution | Directory Open Access Journal |
| issn | 1648-0627 1822-4202 |
| language | English |
| last_indexed | 2024-03-08T07:57:52Z |
| publishDate | 2011-09-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Business: Theory and Practice |
| spelling | doaj.art-8c5236cb78704b28a2ba7e646c54e94c2024-02-02T13:18:44ZengVilnius Gediminas Technical UniversityBusiness: Theory and Practice1648-06271822-42022011-09-01123Ability of combinations of cash flow components to predict financial distressGholamreza Kordestani0Mehrdad Bakhtiari1Vahid Biglari2Imam Khomeini International University, Iran-qazvin-Boulevard, 34149-16818 Qazvin, IranImam Khomeini International University, Iran-qazvin-Boulevard, 34149-16818 Qazvin, IranMalaya University, 50603 Kuala Lumpur, MalaysiaThe 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.https://journals.vgtu.lt/index.php/BTP/article/view/8698cash flow statementcash flow compositionfinancial distressbankruptcyshortage of cashoperational activities |
| spellingShingle | Gholamreza Kordestani Mehrdad Bakhtiari Vahid Biglari Ability of combinations of cash flow components to predict financial distress Business: Theory and Practice cash flow statement cash flow composition financial distress bankruptcy shortage of cash operational activities |
| title | Ability of combinations of cash flow components to predict financial distress |
| title_full | Ability of combinations of cash flow components to predict financial distress |
| title_fullStr | Ability of combinations of cash flow components to predict financial distress |
| title_full_unstemmed | Ability of combinations of cash flow components to predict financial distress |
| title_short | Ability of combinations of cash flow components to predict financial distress |
| title_sort | ability of combinations of cash flow components to predict financial distress |
| topic | cash flow statement cash flow composition financial distress bankruptcy shortage of cash operational activities |
| url | https://journals.vgtu.lt/index.php/BTP/article/view/8698 |
| work_keys_str_mv | AT gholamrezakordestani abilityofcombinationsofcashflowcomponentstopredictfinancialdistress AT mehrdadbakhtiari abilityofcombinationsofcashflowcomponentstopredictfinancialdistress AT vahidbiglari abilityofcombinationsofcashflowcomponentstopredictfinancialdistress |