The sequence of cash flow in bankruptcy prediction: evidence from Poland
The sequence of cash flow in bankruptcy prediction: evidence from Poland

Summary/Abstract: Although cash flow statements based on accounting principles have been compiled for a long time, their application in bankruptcy modeling has been poor. The aim of this paper is to conduct empirical research on the usefulness of cash flow components matched as cause and effect in subsequent periods (sequentially) in bankruptcy modeling. On the basis of the formulated hypotheses, some general ob-servations can be formulated according to the usefulness of the sequence of cash flow components in bankruptcy modeling that is the sequence of cash flow signs, the sequence of cash flow signs and amounts, and also the inclusion of ratios in a cash model that characterize the type of cash flows. The final conclusion of the research is that the signs of cash flow and the signs and the amounts are useful in bankruptcy prediction only under some conditions. Cash flow based ratios characterizing structure of cash flow statements are poor bankruptcy estimators.

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