We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Sustainable versus Unsustainable Operating Cash Flows in UCA Cash Flow Analysis.
- Authors
Fletcher Jr., Ernest S.; Rose, John T.
- Abstract
Previous research argues for the superiority of the Uniform Credit Analysis (UCA) Cash Flow Statement for commercial credit analysis. This study "drills down" into UCA operating cash flow to determine how much of a firm s cash after operations can be viewed as sustainable, i.e., driven by revenue growth, versus unsustainable, driven by changes in operating efficiency and working capital efficiency collectively termed "managerial efficiency." By analyzing these cash flow drivers, we provide a more complete picture of the firm s operating cashflow. Specifically, we identify any distortions in the firm s operating cash flow due to changes in managerial efficiency. This, in turn, allows us to isolate sustainable cash after operations, thereby enhancing cash flow trend analysis for commercial credit assessment. Finally, we recommend that banking and finance textbooks augment their discussions of financial statement analysis by addressing sustainable versus unsustainable operating cash flows in the context of UCA cash flow analysis.
- Subjects
CASH flow; CREDIT analysis; CORPORATE finance; BUSINESS revenue; ORGANIZATIONAL effectiveness; COMMERCIAL credit
- Publication
Journal of Financial Education, 2019, Vol 45, Issue 2, p24
- ISSN
0093-3961
- Publication type
Article