Assess the Quality of Profits using the Cash Flow Statement to Improve Profit Forecasting / Applied Study

Abstract

The present research aims to assess the quality of profits using the cash flow statement for the purpose of improving profit forecasting, the research used the quality of profits as an independent variable, and the prediction of profits as a dependent variable, and the research was applied in Iraq Stock Exchange for the period from 2008 to 2017 on a sample of companies in the sectors (Banks, Services, Industry and Agriculture), and the research relied on (SPSS) for regression analysis, (minitab-17) for time series and (R-3.2.3-2019) for Artificial Neural Network (ANN).

To achieve the research objectives, indicators were selected from the income statement and balance sheet (Accrued profitability indicators included: profit margin index, cost of sales index to net sales, total profit to sales index, return on total assets index, return on equity index), from the statement of cash flows (cash flow statement indicators included: operating cash index, operating cash flow index, operating cash flow adequacy index, cash flow index from operating activities for ordinary shares, return on assets from operating cash flows index, return on equity index from Operating cash flows).

The research reached a number of conclusions, the most important of which is that the monetary basis is the best in predicting profits in the sectors of (banking, industry and agriculture), and the same basis in the services sector.