Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Nicholas G. Apostolou


Generally accepted accounting procedures allow the use of either the direct or indirect presentation of cash flow from operations in the statement of cash flows. A behavioral study is employed to examine the impact of these alternative presentations on the relevance of the information provided by the statement. Bank loan officers make line of credit and interest rate decisions, and projected cash flow from operations based on a set of financial statements presented in either the direct or indirect format. The study also examines the feedback value of the alternative presentations, which is operationalized as the change in accuracy of projections made before and after feedback. The experiment is performed twice, once for a company with increasing cash flows, and again for a company with decreasing cash flows. Data analysis is performed using a priori contrasts and the Mann-Whitney test with the Bonferroni multiple comparison technique. The results of the study indicate that the alternative presentation formats do not result in significant differences for the line of credit, the interest rate premium, or the feedback variables. Some evidence is found that the alternative presentations of cash flow from operations differ in terms of predictive ability. Two of the four cash flow projections are significantly different at the family level of significance of.10. The results also indicate that neither presentation format is always superior to the other in terms of predictive accuracy. While the results of the study are not strong, the primary implication is that the FASB should reevaluate the optional disclosure of the direct format. The direct method may provide additional, relevant information to investors and creditors in certain situations.