EFFECT OF OPERATING CASH FLOW TO RETURN RECEIVED

EFFECT OF OPERATING CASH FLOW TO RETURN RECEIVED
BY SHAREHOLDERS
The results show that operating cash flow have an influence
The most significant effect on returns received by shareholders. In
each year, the company that has a negative operating cash flow only
5-6 pieces. PT Suba Indah which consistently has a negative operating cash flow during
three years and PT Bayer Indonesia, which has a negative operating cash flow in
in 2002, it is in the process of cessation of business units
harm, so it can not avoid negative operating cash flow.
Unlike the performance measures earnings, operating cash flow shows
operating results which funds are received in cash by the company and
burdened with a load of cash is actually already excluded
by the company. It could happen income statement shows sales figures
and operating income are high but turned out to be false, because the company
have not received payment of funds selling. Liquidity difficulties caused
many the emergence of bad debt or receivables with credit terms are very
long.
Many companies are also burdened with costs that are non-cash,
that not only the form of depreciation or amortization, but also the interest expense.
Companies that are in the process of debt restructuring with creditors,
keep records of interest based on previous agreements, although there has been no
payment, resulting in the income statement the interest is
payable.
Management of companies and investors realize that the cash flow
better ensure positive operation of the company's capability to run
business activities in the future. Companies are able to
pay dividends to shareholders is a company that has
high earnings and cash at the same time is also sufficient.
When compared with results of previous studies both
performed by Biddle, Bowen and Wallace (1997), and Peixoto (2001)
nor Fernandez (2001), it turns out the results of this study also showed that
EVA is not proven to have superior performance compared to benchmarks
other. There was also a similarity results showed that all standard
performance measurement has a low contribution to the return received
by shareholders. This suggests that many other factors that are
more dominant influence return received by shareholders.
Research Fernandez (2001) revealed that other factors such levels
significant effect on return rates. In addition, previous studies
carried Garvey and Milbourn (2000) revealed that the company
have implemented EVA EVA will have a value that highly correlated
with the return. According Djawahir (2001), this approach has not been widely EVA
applied in enterprises in Indonesia. While in America and in
Europe, most companies have implemented the EVA model. Companies in
Indonesia is aware and willing to use EVA to measure performance
Pradhono, Effect of Economic Value Added, Residual Income
generally only foreign firms or majority-owned by
foreign investors (Djawahir 2003).
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