American Journal of Applied Sciences

Information Provided by Accrual and Cash Flow Measures in Determining Firms’ Performance: Malaysian Evidence

Norita M. Nasir and Shamsul N. Abdullah

DOI : 10.3844/ajassp.2004.64.70

American Journal of Applied Sciences

Volume 1, Issue 2

Pages 64-70


Accrual and cash flow measures have been argued to be able to evaluate firms’ performance, although the results are inconclusive throughout countries and time. This study examined the accrual and cash flow measures independently and jointly among Malaysian firms. The study predicted that the low cash flow subgroups (high income to cash flow firms) would show better results in operating, investing and financing activities. Our descriptive analysis of the structural components of the firms seemed to confirm that low cash firms relatively had higher sales, total assets and shareholders’ equity than the high cash firms, indicating that these firms showed better operating performance than other subgroups. With regard to the investing and financing activities, small firm group confirmed the expectations but big firms exhibit different results. Further analysis on the correlation among variables yielded evidence to suggest that there is a significant relationship between non-current assets and debt with investing and financing cash flows, in the expected direction of movement. Using income and cash flow measures, independently and jointly, the results show that none of the measures can be used to evaluate Malaysian firms’ performance. The findings appear to be not supportive of previous research which argued that income and cash flow measures have incremental and joint information in assessing firms’ performance.


© 2004 Norita M. Nasir and Shamsul N. Abdullah. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.