Abstract
This study aimed to determine financial and non-financial factors influencing future cash flow and their impacts on company's financial distress. This study uses earnings, cash flow from operations, accrual components, working capital (financial), inflation (nonfinancial) as independent variables that are thought to have an effect on future cash flow. In addition, this research also suspects that there is an impact of this influence on company financial distress. The sample used in this study was 30 food and beverage manufacturing companies listed on the Indonesia Stock Exchange from 2013 to 2015. Hypothesis testing, in this research, used Structural Equation Model (SEM) method with AMOS 24 statistic. The result showed that earnings, accrual component, and working capital had a significant positive effect on future cash flow. Furthermore, cash flow from operation had significant negative effect on future cash flow, but inflation did not affect company's future cash flow. These results indicate that financial variables have a significant effect, both positive and negative, on the company's future cash flow. Meanwhile, non-financial variables have no significant effect. Other test resulted that future cash flow had a significant negative effect on financial distress. Based on the results of this study, it can be seen that stakeholders, especially investors, really pay attention to the company's financial performance compared to non-finance. This is due to the significant influence of financial variables on the company's future cash flow and it can have an impact on financial distress. Therefore, future research is expected to explore other financial factors that affect the company's future cash flow, for example, the company's financial risk.
Highlights
The need for accounting information before making a business decision is important
Cash flow from operation had significant negative effect on future cash flow, but inflation did not affect company's future cash flow. These results indicate that financial variables have a significant effect, both positive and negative, on the company's future cash flow
This condition has received serious attention by the standard drafting body, as stated in the 1978 Financial Accounting Standard Board (FASB) statement on the Statement of Financial Accounting Concept No.1 stating that every financial report presented must be able to provide information that is important to all stakeholders to evaluate the ability companies in generating sufficient cash to pay their debts due, to pay dividends, to buy raw materials, to conduct new investment activities and to predict the company's cash conditions in the future (FASB, 1978)
Summary
The need for accounting information before making a business decision is important. In addition to information about financial position reports and financial performance reports, information about cash flows is important. The emergence of the necessity to report cash flows for the company is illustrated by some companies whose performance and financial condition are good but are unable to finance their short-term needs This condition has received serious attention by the standard drafting body, as stated in the 1978 Financial Accounting Standard Board (FASB) statement on the Statement of Financial Accounting Concept No. stating that every financial report presented must be able to provide information that is important to all stakeholders to evaluate the ability companies in generating sufficient cash to pay their debts due, to pay dividends, to buy raw materials, to conduct new investment activities and to predict the company's cash conditions in the future (future cash flow) (FASB, 1978). This indicated that the company's future cash flow can be predicted using the components that make up profits as documented by Ebaid
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