Study of Relationship between Free Cash Flow and Quality of Earnings (Accruals) of Listed Companies in Tehran Stock Exchange

Abstract

The results of several experimental studies, the notion that the most important source of income deemed to decision makers rely more profit than any other criteria, has been proved, however, it should be noted that as the main source of income, it may not reflect the actual performance of companies and their management, because of the inherent flexibility of accounting standards, the interpretation and application of accounting methods in many cases, the judgments and actions of managers, therefore, the quantity of interest should be given to quality. The main purpose of research, quality of accruals and free cash flows, and that when companies have excess cash how is the quality of accruals? In this study, to assess the quality and relevance of accruals and free cash flows are attempting to assess the impact of listed companies from 2008 to 2011 in the Tehran Stock Exchange. Correlation test was used for data analysis spss software. Survey results indicate that there is a significant relationship between the quality of accruals and free cash flows. The results of this study suggested that the directors must have regard to the flow of economic benefits to the financial reporting within the company and the optimal use of resources.