Cash Flow Management and Earnings Sustainability in Member-Based Financial Institutions: Evidence from Indonesia
DOI:
https://doi.org/10.55583/invest.v6i2.1564Keywords:
Cash Flow, Net Income, Earnings Quality, Net Profit Margin, CooperativeAbstract
This study analyzes cash flows and earnings quality at KSP Karya Abadi in Pemaron Village over 2021–2023. The research uses a descriptive quantitative method with a financial statement approach, focusing on income statements and cash flow reports. The results show that although net income fluctuated—decreasing in 2022 and rising significantly in 2023—the efficiency of earnings, as measured by the Net Profit Margin (NPM), declined from 62.8% in 2021 to 57.1% in 2022 and remained stagnant in 2023. Operating cash flows remained positive throughout the three years, reflecting the cooperative’s ability to generate cash from its core business activities. Earnings quality, assessed by comparing operating cash flows to net income, was categorized as very good in 2021 and 2022, and moderately good in 2023. These findings emphasize the importance of evaluating the nominal value of earnings and their quality and sustainability over time.
References
Aljifri, K., & Elrazaz, T. (2024). Effect of earnings management on earnings quality and sustainability: Evidence from Gulf Cooperation Council distressed and non-distressed companies. Journal of Risk and Financial Management, 17(8), 348. https://doi.org/10.3390/jrfm17080348
Andrén, N., & Jankensgård, H. (2020). Disappearing investment-cash flow sensitivities: Earnings have not become a worse proxy for cash flow. Journal of Business Finance & Accounting, 47(5–6), 760–785. https://doi.org/10.1111/jbfa.12436
Ball, R., & Nikolaev, V. V. (2022). On earnings and cash flows as predictors of future cash flows. Journal of Accounting and Economics, 73(1), Article 101430. https://doi.org/10.1016/j.jacceco.2021.101430
Beyer, A., Guttman, I., & Marinovic, I. (2019). Earnings management and earnings quality: Theory and evidence. The Accounting Review, 94(4), 77–101. https://doi.org/10.2308/accr-52282
Casey, R. J., & Ruch, G. W. (2024). Are earnings better than cash flows at predicting future cash flows? Evidence from apples-to-apples comparisons. Review of Accounting Studies, 29(4), 3218–3257. https://doi.org/10.1007/s11142-023-09805-5
Cheng, C. S. A., Li, S., & Zhang, E. X. (2020). Operating cash flow opacity and stock price crash risk. Journal of Accounting and Public Policy, 39(3), Article 106717. https://doi.org/10.1016/j.jaccpubpol.2020.106717
Christensen, T. E., D’Adduzio, J., & Nelson, K. K. (2023). Explaining accruals quality over time. Journal of Accounting and Economics, 76, Article 101575. https://doi.org/10.1016/j.jacceco.2022.101575
Dechow, P. M. (2010). Understanding earnings quality: A review of proxies, determinants and consequences. Journal of Accounting and Economics, 50(2–3), 344–401. https://doi.org/10.1016/j.jacceco.2010.09.001
Fassas, A. (2023). Earnings quality and firm valuation: Evidence from several European countries. Corporate Governance: The International Journal of Business in Society, 23(6), Article 39. https://doi.org/10.1108/CG-09-2022-0391
Farshadfar, S., & Monem, R. M. (2019). Further evidence of the relationship between accruals and future cash flows. Accounting & Finance, 59(1), 143–176. https://doi.org/10.1111/acfi.12260
Francis, J., LaFond, R., Olsson, P. M., & Schipper, K. (2021). The market pricing of earnings quality and its components: A global perspective. Review of Accounting Studies, 26(4), 1678–1710. https://doi.org/10.1007/s11142-020-09583-9
Guay, W., Taylor, D., & Xiao, J. (2018). Empirical evidence on the relation between accounting earnings and cash flows. Contemporary Accounting Research, 35(1), 155–188. https://doi.org/10.1111/1911-3846.12373
Hasan, M. M., & Habib, A. (2021). Corporate life cycle, earnings quality, and cash holdings. Accounting & Finance, 61(3), 4475–4503. https://doi.org/10.1111/acfi.12694
Kang, S., & Kim, J. B. (2019). Earnings quality and the risk of future stock price crashes: Evidence from operating cash flows. Journal of Corporate Finance, 56, 75–96. https://doi.org/10.1016/j.jcorpfin.2018.10.002
Li, L. Y., Wang, S., & Zhu, W. (2022). Operating cash flows and earnings target revision: Evidence from annual cash bonus plans for CEOs. Journal of Management Accounting Research, 34(2), 181–199. https://doi.org/10.2308/jmar-19-037
Meliá-Martí, E., Mozas-Moral, A., Bernal-Jurado, E., & Fernández-Uclés, D. (2024). Global efficiency and profitability: Cooperatives as social innovation agents vs. joint stock companies in the agri-food sector. Journal of Innovation & Knowledge, 9(3), Article 100537. https://doi.org/10.1016/j.jik.2024.100537
Nallareddy, S., Sethuraman, M., & Venkatachalam, M. (2020). Changes in accrual properties and operating environment: Implications for cash flow predictability. Journal of Accounting and Economics, 69(2–3), Article 101313. https://doi.org/10.1016/j.jacceco.2020.101313
Pimentel, R. C., & Malacrida, M. J. C. (2020). Quarterly earnings, operating cash flow, and accruals in future performance assessment. BAR – Brazilian Administration Review, 17(4), 1–29.* Available at* https://www.scielo.br/j/bar/a/97cJQfyz74yNyRjp5fHnWSC/
Siladjaja, M., & Jasman, J. (2024). The role of earnings quality and future returns: An illustrative simulation of a rational decision model. Journal of Open Innovation: Technology, Market, and Complexity, 10(1), Article 100191. https://doi.org/10.1016/j.joitmc.2023.100191
Sohn, B. C. (2018). The effect of accounting conservatism on earnings quality and the cost of equity capital. Asia-Pacific Journal of Accounting & Economics, 25(1–2), 123–142. https://doi.org/10.1080/16081625.2016.1266270
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Ni Wayan Novi Budiasni, Ni Luh Putri Aryani, Muhammad Luthfi Hamzah, Tilovmurodov Dostonbek Furqat Ugli
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
