Evaluation Based On The Cash Flow From The Profit Quality Of Listed Companies

With the development of the listed companies, a large number of phenomenons about earnings management and profit manipulation have emerged, so the traditional profit has been difficult to meet the needs of users. And the profit quality based on cash flow which as an important part of the quality of financial information has been getting more and more attention from stakeholders.This paper starts with the theoretical knowledge of profit quality and cash flow. It expounds their intrinsic link, uses literature analysis and cash flow method to build the initial group of indicators based on cash flow, which as the core of four aspects of profit:realizability, finance security, stability and growth. At the same time, it takes advantage of2008-2011’s financial date of75listed companies in Shanghai and Shenzhen A-share’s pharmaceutical and biotech industry as an example to filter from the initial group, and establishes the final group of indicators by testing the correlation and significance of indicator data. Then, by giving every indicator a weight, it gets the comprehensive evaluation model. And by analyzing the whole profit quality and the four aspects, we can see the profit quality of this industry is bad which performs low score of four aspects of profit. At last, it concludes suggestions for improvements according to the analysis.