Survey of the methodology for cash flow estimation utilized by large firms in the United States.

摘要

A study examines how large United States large firms actually generate their cash flow information for capital project decisions. This research focuses cash flow estimation practices as well as forecasting error experiences. To gather data, questionnaires were mailed to Fortune 500 companies.; In general, individual hypothesis tests did not support hypothesized positive relationships between (1) ROE and use of specialized personnel; (2) ROE and use of standardized capital budgeting procedures; (3) ROE and firms that use multiple cash flow estimating procedures; (4) ROE and the form of adjustment for inflation; and (5) ROE and use of the Economic Value Added (EVA) technique. However, using loglinear regression analysis, we found that firms that use (1) special personnel and use (2) standard procedure for generating cash flow estimates achieve a higher level of accuracy than firms that do not. We also found an increasing percentage of firms are using multiple estimates of cash flow for large projects. This result is consistent with previous studies which found the quality of cash-flow information was significantly related to the performance of the firm.; Though management's discretionary judgement is still dominant in investment decision making, this study suggest that business and industry are increasing utilizing standard analytical techniques in cash flow estimation for project analysis and evaluation.