Academic Journal
Using combined accrual and cash ratio analysis to determine pre-bankruptcy status
| العنوان: | Using combined accrual and cash ratio analysis to determine pre-bankruptcy status |
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| المؤلفون: | Alexey Litvinenko |
| المصدر: | Contabilitate şi Informatică de Gestiune, Vol 23, Iss 4, Pp 826-869 (2024) |
| بيانات النشر: | Bucharest University of Economic Studies, 2024. |
| سنة النشر: | 2024 |
| المجموعة: | LCC:Business LCC:Accounting. Bookkeeping |
| مصطلحات موضوعية: | cash flow ratios analysis, accrual-based ratios analysis, solvency analysis, liquidity analysis, profitability analysis, efficiency analysis, Business, HF5001-6182, Accounting. Bookkeeping, HF5601-5689 |
| الوصف: | Research Questions: 1) To what extent does the combined use of accrual-based and cash-based ratio analysis provide comprehensive insights into a company’s solvency, liquidity, profitability and efficiency? 2) Does the combined accrual-based and cash-based ratio analysis help in revealing manipulations in accrual financial statements? 3) How does the analysis of profitability and efficiency explain the results and levels of solvency and liquidity in a company? Do solvency and liquidity depend on external or internal sources of financing? 4) Does the present method of analysis indicate which company is closer to the pre-bankruptcy stage? Motivation: despite high demand from business practice and academics, there are not enough literature and methods combining cash-based and accrual-based ratio analyses in the specific dimensions of solvency, liquidity, profitability and efficiency for the determination of the pre-bankruptcy state of production companies. Idea: in this paper, the author created a method of analysis combining cash-based and accrual-based ratios in four dimensions (solvency, liquidity, profitability and efficiency) for the determination of the pre-bankruptcy state of production companies. Data: historical panel data for the years 2013-2022 obtained from the annual, managerial, and auditor’s reports of two production companies listed on the Baltic Stock Exchange. Tools: The mixed methods were used combining quantitative ratio calculations based on the historical panel data from financial statements with qualitative explanatory information from financial reports. Findings: The developed combination of ratio counterparts proves to be highly informative. The ratios used across all dimensions complement each other, providing a comprehensive picture of the companies' financial positions. Discrepancies within the ratio pairs suggest possible manipulations in accrual-based ratios. Low profitability and efficiency results during the first five years of analysis predicted a subsequent decrease in solvency and liquidity. Maintaining high levels of profitability and efficiency, and avoiding reliance on debt is crucial to sustain solvency and liquidity. A company is closer to pre-bankruptcy if the ratio analysis reveals significant discrepancies between the counterparts, with negative results prevailing. Contribution: the paper contributes to both business practice (accountants, auditors, financial managers) and the ongoing academic discussion with the dual method of ratio analysis for a more precise determination of the pre-bankruptcy state of the companies. This method allows to determine manipulations in accrual-based financial statements more effectively. |
| نوع الوثيقة: | article |
| وصف الملف: | electronic resource |
| اللغة: | English |
| تدمد: | 1583-4387 |
| Relation: | http://online-cig.ase.ro/jcig/art/23_4_6.pdf; https://doaj.org/toc/1583-4387 |
| DOI: | 10.24818/jamis.2024.04006 |
| URL الوصول: | https://doaj.org/article/85c3177736264c1484bfbb7526e9a06b |
| رقم الانضمام: | edsdoj.85c3177736264c1484bfbb7526e9a06b |
| قاعدة البيانات: | Directory of Open Access Journals |
| تدمد: | 15834387 |
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| DOI: | 10.24818/jamis.2024.04006 |