The Effect of Using Accounting Measurement Bases (Cash and Accrual) on the Performance of the Industrial Companies Listed on Palestine Stock Exchange

Abstract

This study aimed to measure the performance of the Palestinian industrial corporations, a sample of 13 industrial companies listed on Palestine Stock Exchange had selected for the period between 2009 and 2018, researchers used multiple linear regression analysis to create two models representing the financial performance on accrual and cash basis, return on assets (ROA) was the dependent variable, The independent variables of the accrual based model included: current ratio, net profit margin, return on capital employed, debt to assets and interest coverage ratios, all of them had significant impact on ROA. The cash-based model included: cash to current liabilities, cash to sales, cash to working capital, cash to debt, and cash interest coverage ratios, all of them except debt to assets had significant impact on ROA. Comparison between previous models showed that accrual based model had better performance in explaining changes in ROA.