Asked by Tasha Christina on Jul 07, 2024
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Research shows that stock returns correlate better with accrual earnings than with realized operating cash flows.
Accrual Earnings
The earnings of a company that are calculated based on accrual accounting, which records revenues when earned and expenses when incurred, regardless of cash flow.
Realized Operating Cash Flows
Cash flows that are generated from a company's normal business operations and have been received or can be readily converted to cash.
Stock Returns
The total return on investment from owning shares in a company, including dividends received and capital gains.
- Understand the relationship between stock returns, accrual earnings, and operating cash flows.
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Learning Objectives
- Understand the relationship between stock returns, accrual earnings, and operating cash flows.
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