Earnings Quality Analysis Of PLSD Company From The Perspective Of Cash Flow

In listed companies,earnings quality is usually used to evaluate an enterprise’s operating status and development degree.Since the current accounting standards of China require Chinese enterprises to adopt the accrual basis,this will lead to the profit from the profit statement and actual earnings difficult to match;In addition,some companies in order to sugarcoat the performance or managers to seek personal gain and other purposes of earnings management,or even illegal manipulation of profits,which makes the decisions of investors and creditors are easily induced by the results of the book earnings in the income statement,so it is increasingly difficult to evaluate the quality of corporate earnings.However,if the actual cash receipts and payments can be checked with the data in the income statement at the same time,it will be difficult for enterprises to have room to manipulate profits.Therefore,the advantage of analyzing the company’s earnings quality from the perspective of cash flow is that cash flow is not as easily manipulated as profit,and the profit of an enterprise must be accompanied by cash flow,so as to reflect the true level of earnings quality.At the same time,the cash flow of an enterprise also shows the actual ability to pay and the cash security of earnings.Based on this,it has more reference value to diagnose the earnings quality of enterprises from the perspective of cash flow statement.Through summarizing and sorting out the research literature of domestic and foreign scholars on earnings quality,this paper holds that earnings quality is a sublimation of traditional profitability analysis,especially the earnings quality analysis combined with cash flow statement is mainly based on cash basis,which further revises and tests the company’s profit indicators,evaluates the advantages and disadvantages of an enterprise’s profits in an accounting cycle,and also reflects whether the enterprise’s earnings are sustainable.This paper selects the financial report data of PLSD Company and four other representative enterprises in the same industry from 2018 to 2021,and makes a four-year vertical comparison between PLSD Company itself and several other companies through the calculation of 15 cash flow indicators,so as to evaluate the current situation of its earnings quality in five aspects: profitability,sustainability,cash security,growth and security.Through calculation and analysis,it is found that PLSD company’s earnings quality has the following problems: insufficient ability to obtain net profit,insufficient cash flow from operation,slow withdrawal of funds,mismatch between operating profit and operating income,poor solvency,etc.This is mainly due to the lack of competitiveness of its main products,commercial credit risks,inventory overstocking,and high costs.The corresponding improvement measures are given,such as improving the competitiveness of the main products,strengthening the credit risk management,strengthening the inventory management,and paying attention to the management and control of costs.