This paper investigates the role of accruals on cash flow and profit relations in performance measurements of accepted firms at TSE. Generally, Management has some discretion over recognition of earnings. Therefore earnings will become less reliable and “Cash flows” would be more preferable. On condition that 1) the measurement period of cash flow and profit variable is short or 2) the changes in the firm’s working capital is great, those accruals that separate accounting profits from cash flows achieve more importance.
The results prove that the firm’s size has significant effect on the relation between earnings, cash flows and stock returns. However, the effect of industry type on the relation between earnings, cash flows and stock returns is yet unknown.
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