Universal Journal of Accounting and Finance Vol. 1(3), pp. 95 - 102
DOI: 10.13189/ujaf.2013.010302
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Cash Flow Statement as an Evidence for Financial Distress


Naz Sayari 1,*, F.N. Can Simga Mugan 2
1 Department of Business Administration, Middle East Technical University, Ankara, 06800, Turkey
2 Department of Business Administration, Izmir University of Economics, ─░zmir, 35330, Turkey

ABSTRACT

In this study, the effect of cash flow components on financial distress score is examined for 124 companies selected from Istanbul Stock Exchange (ISE). It is further analyzed whether cash flow components have an explanatory effect on bankruptcy risk and financial health of companies. Four separate models are constituted and Linear Regression Model is used to evaluate company age, company size, cash flow from operations (CFO), cash flow from investing (CFI) and cash flow from financing (CFF) activities as a function of financial distress score of companies. The results show that there is a negative relationship between CFO, company size and financial distress score of companies. On the contrary, CFF is observed to be positively related with the financial distress score. Meanwhile, it is further observed that the standardized coefficient of CFI is statistically insignificant and hence it does not provide any evidence for the financial weakness or bankruptcy risk of companies.

KEYWORDS
Cash Flow Statement, Cash Flow from Operations, Cash Flow from Investing, Cash Flow from Financing, Financial Distress Score, Bankruptcy Risk, Financial Health

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Naz Sayari , F.N. Can Simga Mugan , "Cash Flow Statement as an Evidence for Financial Distress," Universal Journal of Accounting and Finance, Vol. 1, No. 3, pp. 95 - 102, 2013. DOI: 10.13189/ujaf.2013.010302.

(b). APA Format:
Naz Sayari , F.N. Can Simga Mugan (2013). Cash Flow Statement as an Evidence for Financial Distress. Universal Journal of Accounting and Finance, 1(3), 95 - 102. DOI: 10.13189/ujaf.2013.010302.