Comparing the Value Relevance of Cash Flow Ratios and DU Pont Ratios under IFRS: A Case Study

Abstract

In this research, the main aim is to point out the importance of financial reporting from the companies’ both internal and external points of view. For this reason it is good to emphasize that the accounting knowledge that will be gained by the companies’ financial reports leads the way in decision making process of the internal and the external environment of the companies. Within this context, the financial ratios have been classified and described. By the reason of the fact that cash flow ratios and Du Pont ratios are the key considerations of the research, these mentioned ratios have been examined in more detail. While taking the next step, the value relevance of the cash flow ratios and Du Pont ratios have been compared. Within this value relevance comparison process, the companies that take place in BIST 100 have been taken into consideration. While comparing the value relevance of the cash flow ratios and Du Pont ratios of the BIST 100 companies, the effects of the CFFO, ROA, and ROE on the companies’ stock prices and stock returns have been examined. Based on the findings that are obtained from the research, ROE and ROA are consistent with the stock price and/or return.