Earnings, accruals, cash flows, and EBITDA for agribusiness firms

Carlos Omar Trejo‐Pech; Richard N. Weldon; Lisa A. House

doi:10.1108/00214660880001232

Earnings, accruals, cash flows, and EBITDA for agribusiness firms

Journal

Agricultural Finance Review

ISSN

0002-1466

Date Issued

2008

Author(s)

Carlos Omar Trejo‐Pech

Facultad de Ciencias Económicas y Empresariales - CampGDL

Richard N. Weldon

Lisa A. House

Type

text::journal::journal article

DOI

10.1108/00214660880001232

URL

https://scripta.up.edu.mx/handle/20.500.12552/3553

Abstract

This study examines empirical relationships of earnings, accruals, and cash flows for the U.S. food supply chain sector (i.e., agribusiness) and compares them with results for the complete U.S. market. In addition, we evaluate earnings before interest, taxes, depreciation, and amortization (EBITDA) as a potential proxy for cash flow. Empirical results show that while earnings and accruals are systematically positively related, accruals and cash flows are systematically negatively related. Moreover, both the magnitude and the behavior of EBITDA across different levels of cash flows for agribusinesses do not mimic cash flows. Thus, this metric is not a valid proxy for cash flow in accrual research studies.