Is The Free Cash Flow Better Able To Predict The Continuous Operation Of Companies?—Compared With The Influence From Continuing Operations Of The Profit

The Going-concern ability is an important index of the Companies development evaluation. For continuous operation ability of research, there are two researches were studied generally by the profit index and free cash flow index. In recent years, such as Lantian inflated income incident and Enron Corporation inflated profits malignant accounting fraud at home and abroad, make the accounting profit is more and more questioned, based on research from the point of accounting profits, further from the perspective of free cash flow, the thought of evaluating the going-concern ability of listed companies. Based on the theoretical literature on the basis of the research of accounting system in China, found in free cash flow ability to continue as a going concern than the accounting profits of listed companies is more authenticity. "Free cash flow" is the operating activities cash flow balance after the deduction of the capital expenditure, using this index can effectively analyze the enterprise ability to continue as a going concern, to measure the strength of the future development of the enterprise.So this article USES normative research and empirical research method of combining the analysis of the influence of free cash flow, the ability to continue as a going concern. First of all, through the free cash flow theory and the company’s ability to continue as a going concern and research, as well as to the free cash flow and the relationship between the continued operation of accounting profit for the enterprise ability of contrast and analysis, it is concluded that the enterprise continues to management ability was correlated with the free cash flow, further points out that the study from the perspective of accounting profit enterprises continue to confusion and problems in the management ability, and the advantage of the free cash flow Angle.Second, the empirical analysis, this paper chose 127 listed companies in 2003-2014, 12 years of sample data, using OLS regression method, the free cash flow to the total samples and samples of different enterprise and company’s ability to continue as a going concern regression analysis.In this paper, the study found that free cash flow indicators and accounting profit targets are main factors to affect the company’s ability to continue as a going concern,can better predict ability to continue as a going concern. Book profit targets, but relative to the free cash flow indicator more impact on the company’s ability to continue as a going concern, evaluation method is more reliable, so in the actual operation of listedcompanies need to pay more attention to the importance of free cash flow. Also found that subject to the enterprise resource concentration, invasive ability and enterprise debt paying ability, the influence of the free cash flow indicator in the high-tech enterprises to the company’s ability to continue as a going concern assessment is better, and more significantly, and the profit targets in the traditional manufacturing to the company’s ability to continue as a going concern assessment ability is better. Sustaining enterprise management ability, therefore, you have to get positive free cash flow, the company’s capital expenditure must be within reasonable limits. Investors, corporate creditors and government regulators for the choice of listed companies and regulatory, must pay more attention to the flow of free cash flow.