International Journal of Economics and Business Administration
Articles Information
International Journal of Economics and Business Administration, Vol.1, No.2, Sep. 2015, Pub. Date: Aug. 3, 2015
Going Concern Assessment Through Cash Generating Power: Evidence from Cash Flow Statements (A Case Study of Nigerian Breweries PLC)
Pages: 113-119 Views: 2723 Downloads: 1111
[01] Alayemi Sunday Adebayo, Faculty of Business and Social Sciences, Department of Accounting, Adeleke University, Ede, Osun State, Nigeria.
[02] Owolabi Sunday Ajao, Department of Accounting, Babcock Business School, Babcock University, Ilishan-Remo, Ogun State, Nigeria.
[03] Sokefun Adeyinka Olawanle, College of Management Sciences, Department of Financial Studies, Redeemer’s University Ede, Osun State, Nigeria.
Purpose The purpose of the study is to assess going concern of an entity through cash generating power as evident from cash flow statement in Brewery industry in Nigeria with special reference to Nigerian Breweries Plc. The reason for the choice of the sample is that it is the pioneer and largest brewing company in Nigeria. As at 31st December, 2012, it had a market capitalization of N1.1 trillion, making it the second largest company in Nigeria. Data for this study were generated from secondary sources (annual report and account of Nigerian Breweries Plc.). A quantitative approach is adopted which makes the research a scientific study which seeks to solve practical problems and its aim is to develop practical knowledge in investigating power of cash flow of Nigerian Breweries Plc. It can be considered as an applied research. The result of this research can be applied to solve the problem that exists on how to manage cash flow in an organization to maintain going concern of an organization. There is negative effect of current liability coverage on cash generating power which is not significant. This means that as the cash generating power increases there will be increase in the number of times current liability coverage are covered. There is direct relationship between cash generating power and long term debt coverage which is significant. This means that long term debt coverage directly related to cash generating power of the company. There is negative relationship between cash generating power and interest coverage which is significant. The implication is that interest coverage has inverse relationship with cash generating power of the company. If the assets are utilized judiciously as indicated by the earnings quality, the better for the company, this eventually will culminate into sound cash generating power for the company. Earning quality provides a more realistic indication of the extent of deviation between operating cash flow and reported earnings. Information from cash flow from investing and financing activities is very important, however, the principal motive for the existence of the organization is its operating activity.
Going Concern, Cash Generating Power, Operating Activity, Cash Flow Statement, Long Term Debt
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