Global Journal of Management and Business Research, A: Administration and Management, Volume 22 Issue 8

As pointed out in the previous pages, the doctrine and accounting standards focus unanimously on cash flows. In contrast to those who prefer to highlight financial cash flow understood in a broad sense and∆ CNWC, some favour the determination of cash flow by contrasting "monetary" costs and revenues (i.e., the shares of positive and negative income components that impact cash/bank). Regardless of the chosen solution, there is no doubt that the ultimate goal is consistently identified in determining cash flow. In conclusion of these brief methodological remarks regarding the quantitative calculation of the characteristic cash flow, it seems appropriate to mention that it can determine this value by applying two different logical, quantitative methodologies: direct or indirect. Direct determination involves contrasting characteristic "monetary" costs and revenues (i.e., the shares of positive and negative income components that impacted cash/banking), with or without the "intermediation" of financial cash flow and∆ CNWC. The numerical examples above illustrate the direct calculation of cash flow. Against this technique, there is the indirect determination of the aggregate that is the subject of interest. In this case, cash flow is derived from the summation of profit, and all costs and revenues that are non-cash by definition (such as depreciation and amortization, allowances for provisions, etc.) and are not part of core business (such, for example, finance charges, tax costs, capital gains, etc.). In the above example, the indirect determination of cash flow would result from the following summation: Posta contabile Importo Utile di esercizio 850 + ammortamenti 400 + TRF e acc.tia fondi rischi e oneri futuri 300 + oneri finanziari 200 Cash flow caratteristico in senso finanziario 1750 +/- ∆ CNWC (250) Cash flow monetario caratteristico 1500 In the writer's opinion, the direct calculation methodology is preferable because it is immediately understandable. The indirect calculation, on the other hand, while achieving the same accounting result, may appear difficult to interpret because it derives a monetary value from the summation of data that, by definition, do not represent liquid values. After this brief methodological analysis, it is necessary to understand whether knowledge of the characteristic monetary cash flow is sufficient in the context of creditworthiness assessment or whether, on the contrary, full reporting is required. The cash flow resulting from the performance of typical activities (or characteristic monetary cash flow) is an indispensable element of knowledge for those who must assess a company's financial situation. Indeed, this aggregate highlights, in a dynamic sense, the liquid source that should identify the primary "source" of liquidity. Therefore, creditworthiness assessment is strongly influenced by knowledge of this value. Since civil regulations do not require the disclosure of such a figure, it seems relevant to understand whether it can determine such an aggregate based on the indications in the financial reporting published at the business registry office. One of the most significant obstacles that an external operator encounters in determining characteristic monetary cash flow is related to the impossibility, already noted in the preceding pages, of identifying typical costs and revenues. Indeed, the conformation of profit and loss governed by Article 2425 of the Civil Code does not allow the identification of such items. Determining such flow on the exclusive basis of publicly disclosed data appears, therefore, a complicated operation unless one opts for very obvious simplifications (such as, for example, the inclusion in the characteristic cash flow of any ordinary capital gains, ordinary capital losses, rental income, ordinary contingencies, etc.). For this reason, the calculation of the above flow should be facilitated by the direct cooperation of the enterprise under analysis. Even if the analyst does not attach particular importance to the characteristic monetary cash flow and opts for the sole determination of the cash flow from income management, as identified by IAS 7 or OIC 10, they would encounter the same obstacles mentioned above. As is the case with ratios, the determination of cash flow calculated based on financial reporting published values may be perfectly true, just as it is possible, on the contrary, to contain matters that do not pertain to the calculation in question. Unfortunately, even in this case, the external operator cannot assess the degree of correctness/accuracy of the quantitative determination of the flow determined based on mere financial reporting intended for third parties external to the enterprises. Financial Reporting Destined to External Third Parties as a Tool for Analyzing Credit Worthiness: Usefulness and Limitations. The Italian Case Global Journal of Management and Business Research Volume XXII Issue VIII Version I Year 2022 ( ) A © 2022 Global Journals 98