| Earnings quality is widely used in listed companies as one of the commonly used methods to evaluate the development of enterprises.However,the main accounting basis of the income statement is accrual basis.If the company uses financial fraud to whitewash the statements and hide the existing cash flow problems,then using the income statement to judge the quality of the company’s earnings may mislead shareholders and creditors.However,if the profit is checked accordingly when cash is actually received or paid in cash,it is difficult for the enterprise to have room for manipulation.Based on this,diagnosing the company’s earnings quality from the perspective of the cash flow statement is even more valuable.This article uses the data from 2015 and 2018 of Sany Heavy Industry and a number of listed companies that are representative of the same industry to perform horizontal and vertical comparisons through the calculation of 14 indicators to analyze its earnings quality in terms of cashability,safety,Status of stability and sustainability.According to calculations,Sany’s earnings quality has the following problems: weak cash return ability of investment income,weak debt repayment ability,the contribution of main business income to total profit continued to decline,and insufficient net operating cash flow growth.Mainly due to the risks of its commercial credit,backlog of inventory,increased investment payment funds,slow return of funds for construction projects,large fluctuations in investment income,and a large proportion of short-term debt.Corresponding improvement measures are given: strengthen credit risk management,strengthen inventory management,increase profitability of main business,focus on "star business" and mature international markets,and strengthen internal financing and long-term financing.The results of the above analysis show that,for companies without sufficient cash flow protection,the level of their book profit or loss cannot represent the quality of their earnings. |
