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Reconstructing Pre-1987 Compustat Cash Flow from Operating Data

Article Quant Q&A · Author: stevew
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Summary

The post concerns replicating the cash-flow-to-assets component of Piotroski's F-Score when Compustat's operating cash flow item is unavailable for earlier years. The questioner notes that the desired historical sample begins before the reported start of that item and asks whether cash flow can be inferred from net income and working-capital changes.

The reply gives an accounting-variable expression using IB, changes in ACT, CHE, LCT, and DLC, and depreciation DP as a way to construct operating cash flow. It points to a finance study as a reference. The excerpt does not define the Compustat variables, explain sign conventions or data handling, or show a validation against reported cash flow. Researchers should therefore consult the cited source and verify variable definitions and coverage before applying the expression in a historical F-Score replication.

Key ideas

  • The question addresses missing historical operating cash flow data in a Compustat-based F-Score replication.
  • The reply supplies a reconstruction using income, changes in balance-sheet accounts, and depreciation.
  • The cited study is offered as a reference for the accounting expression.
  • Variable definitions, sign conventions, and validation are not explained in the excerpt.

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Full text
# Cash Flows from Operations in Compustat


# Cash Flows from Operations in Compustat












I'm trying to replicate Piotroski's F-Score (2000) for my PhD. In the paper, one of the components to F-Score is `CFO / Assets` from Compustat. However, item 308 (OANCF) only starts from 1987 and Piotroski's data set starts from 1976. Does anyone know how was cash flow calculated prior to 1987 (or was it derived by subtracting change in working capital from net income)?

## Answer by Benny (score 1)

https://quant.stackexchange.com/a/53357

IB-ΔACT+ΔCHE+ΔLCT-ΔDLC+DP

See: Ni (2020, JCF) "Does stakeholder orientation matter for earnings management: Evidence from non-shareholder constituency statutes"

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.