Analysts, financial managers, and banking institutions all utilize the cash flow statement extensively, but their goals are always the same: to understand where money comes from and how to spend it. Since many businesses use financial analysis to assess their financial performance and forecast their future, cash flow is important because it shows the monetary impact of all activities carried out by the economic unit during the financial period as well as the nature of this flow both internally and externally, Since the accuracy and validity of the various financial statements primarily the balance sheet and the statement of business results or income statement determine the validity of the analysis, the methods employed for financial analysis may vary from company to company, primarily depending on the analysis's goal. Financial statements can be compared, and financial ratios can be used for analysis. However, despite its benefits, financial analysis that relies on the income and financial position statements may produce inaccurate results because of the drawbacks these financial statements, including the income statement and balance sheet, suffer.

Research methodology

Study problem: The issue with research is that a company's ability to remain in business depends on both its profitability and the existence of positive cash flows from operations. Without these cash flows, a company would not be able to pay its outstanding debts of all kinds, even if it did make a profit. In several economic units, net cash flows may exceed or fall short of net profit after taxes.

The importance of research

The importance of the exploration came from circumstance that the cash flow statement carries great importance for the users of the financial statements and facilitates the process of understanding and analysis because it provides financial information that is free from misinformation, which is modern as one of the main requirements for enterprises and provides useful information about the activities of the establishment operational, investment and financing' and exposed economic units to financial crises.

Research objectives

The research aims to analyze the relationship between cash flows and financial performance and their reflection on tax revenues, and to identify the extent to which industrial companies use different financial statements to assess liquidity, profitability, the company's ability to employ its funds andalign capital, using the statements of financial position and income on the one hand and the statement of cash flows on the other.

Research hypothesis

Two fundamental hypotheses form the basis of the study and are as follows: 

• In the Iraqi General Tax Authority, there is no statistically significant relationship or influence between cash flows and tax receipts. 

• The Iraqi General Tax Authority's financial performance and tax collections do not correlate or have an influence that is statistically significant.

  • Giving readers of financial statements information about cash flows so they may discover guidelines and pillars that aid in assessing the company's capacity to produce cash, pinpoint its regions of usage and timing, and ascertain the level of certainty surrounding its future success.

Research sample

To investigate the relationship between cash flows and financial performance and show how this impacts tax collections, the Iraqi General Tax Authority was used as the study sample for the 2015–2024 period.

The Theoretical Framework of the Research

The concept and importance of the cash flow statement: Cash is a major concern when it comes to assessing the economic unit's cash liquidity and assisting in the achievement of the intended financial goals. In order for the cash balance to match the start and finish of the period, the statement of cash flows is seen as a list that displays cash collections, cash payments, and net change in cash via operational, investment, and financing activities [1]. 

In the beginning, the concept of cash flow should be addressed, which means the process of transferring money inside and outside the company, as the movement of money inside the company is called positive cash flow, while the movement of money outside the company is called negative cash flow, so cash flow is the lifeblood of the company, and that accuracy in determining cash flows makes the company able to make important financial decisions regarding the survival of the company or declare bankruptcy [2] .  

Although the focus on the financial statements provided by the statement of cash flows alone does not provide enough explanatory power to the company's performance as the income statement does, the focus on both improves the informational content of the financial statements that expose the company to the public. The statement of cash flows aids in identifying the company's strengths and weaknesses in terms of its ability to generate cash, which is the primary element in the payment of obligations or financing and the distribution of profits, whether in the short term or the long term [3]. 

 The following explains the significance of the cash flow statement for economic units [4]:

• Oblige all companies to provide appropriate information about changes in cash and its equivalents, through the preparation of a cash flow statement classified according to operational, investment and financing activities.

• Unifying the methods and foundations used in preparing the cash flow statement by various economic activities.

Principles of tabulation and presentation of information in the statement of cash flows

IAS7 IAS VII on the statement of cash flows states that there are two ways to create and display the statement of cash flows: the direct approach and the indirect technique, and whether the direct method or the indirect method is used, the result does not differ, and the difference is only in the way the information is presented within the operational activity [5]. According to IAS7, the company is free to select one of two methods for the purpose of presenting the cash flows realized for operating activities [6]:

• Direct method: This approach concentrates on the primary elements of cash flow entrance and departure related to the business's operational activities.

Indirect method: To create a cash flow statement, we need to collect a collection of data from several sources. Then, we follow a set of sequential processes to create the final cash flow statement. By adding or removing factors that don't affect cash, including operational cash payments for previous or next years, this technique focuses on determining the net cash flows of operating activities. It also highlights how 

• important information is.  In the declaration on cash flow and preparation methods. 

The cash flow statement is a report that shows how the company finances its activities and how to use them during a certain period of time. The company may achieve a high net income and have low cash flows from operational, investment, and financing activities, or vice versa, have a low net income and high cash flows. These are the most significant differences between the income statement and the cash flow statement. The income statement shows profit and loss during a specific period of time and the business that led to its achievement. of these activities, therefore the cash flow and income statements complement one another to reveal the economic unit's outcomes [7].

The concept of financial performance and methods of measurement: Financial performance is a composite measure of an institution's financial health, its capacity and willingness to meet long-term financial obligations, and its commitment to providing services in the foreseeable future. Consequently, different researchers employ various criteria to evaluate financial performance. Some focus on the organization's ability to fulfill its financial commitments, while others emphasize the financial results of the business's operations. Thus, financial performance involves quantifying the financial outcomes of a business's operations and policies, and identifying the organization's strengths and weaknesses by establishing connections between the income statement and financial position items. These outcomes are reflected in the business's profitability, liquidity, and leverage [8].

Some definitions of financial performance emphasize a company's ability to generate revenue, viewing financial performance as a measure of how effectively a company utilizes its assets to produce income. Corporate financial performance reflects an environment that demonstrates how firms leverage their resources, intellectual capital, and capital structure to drive revenue generation [9].

Financial performance is one of the most commonly used dimensions for evaluating company performance, recognized for its stability and sophistication. The importance of corporate financial performance is underscored by the fact that a company's success is largely determined by the results of its performance over a specific period. Overall performance, and financial performance in particular, has become a central focus in management science for researchers and writers alike [10]:

• Shows how well the business can accomplish its objectives.

• It gives a collection of data that helps the business understand its financial status, which helps it make wise decisions going forward.

• Assesses a company's credit standing and capacity to meet its responsibilities.

• Assess how well the administrative system works and how well it accomplishes the goals of the business.

• Provides the opportunity to learn about and monitor the company's operations and activities, as well as the financial and economic conditions that surround it.

The business unit needs to know and analyze key financial performance indicators to monitor the financial health of an organization. The basic indicators used to evaluate financial performance can be illustrated through the following [11]:

• Gross profit margin: shows the percentage of revenues achieved by the company after deducting the cost of goods sold during a certain period.

• Net profit margin: shows the percentage of net income that remains after adding all expenses, taxes and business costs.

• Return on Equity (ROE): Shows the extent to which management can use shareholders' equity to make profits.

• Quick Ratio: Measures a company's ability to meet immediate financial obligations using the most liquid assets.

• Revenue growth rate: measures the growth rate of a company's revenues over a certain period of time.

• Interest Coverage Ratio: Assesses the company's ability to pay interest on its debts compared to earnings before interest and taxes.

The relationship between cash flows, financial performance (FP) and tax revenues:  The relationship between cash flows, FP and tax revenues is one of the important topics in the world of finance and business, and this relationship can be clarified through the following [5]:

• Cash flows: Cash flows reflect the movement of money inside and outside the company, and provide vital information about the company's ability to cover its expenses, pay off its debts, and invest in growth, and that positive cash flows indicate good financial health, while negative cash flows may alert to potential problems. 

• Financial performance: Financial performance includes the ability to make profits and manage resources effectively. Financial performance affects a company's ability to attract investors and expand its activities. There is a strong correlation between cash flows and financial performance, with strong cash flows enhancing the overall performance of the company. 

• Tax revenue: Tax revenues are funds that governments collect from companies and individuals and are used to finance public expenditures. Tax revenues depend on the profits made by companies; increased profits lead to an increase in taxes paid.

The relationship between these elements is that positive cash flows lead to strong financial performance, and when cash flows are positive, it enables companies to invest in business development and make higher profits. Good financial performance boosts tax revenues, as companies with strong financial performance pay higher taxes, increasing government revenues. Increasing tax revenues also helps governments improve their cash flows, enabling them to achieve their financial and economic goals [12].

In general, it can be said that cash flows directly affect the financial performance of companies, which ultimately reflects on the tax revenues collected by governments. Therefore, understanding this relationship is vital for both businesses and governments to achieve financial sustainability [13].

The Practical Side of The Research

About the Iraqi General Tax Authority: In 1982, the General Tax Authority and Income Tax Law No. 113 of 1982 came into being through the merger of the Directorate of Public Revenue, which was responsible for enforcing the Real Estate Tax Law, and the General Income Tax Directorate, which is in charge of administering the Income Tax Law. The General Tax Authority is organized into departments, Authority branches, and assessment units that function in locations near customs borders. Regarding the Authority's branches, the General Tax Authority's organizational structure comprises forty tax branches located throughout Baghdad's provinces, cities, and suburbs. These branches' organizational structures include divisions for commercial establishments and professional evaluation units. In addition, the Secretariat of the Treasurer and the assessment units operating in the border customs areas are in charge of conducting tax accounting on imported goods in compliance with customs declarations and collecting the estimated tax as a deposit for the public good.

Measuring operational, investment and financing cash flows (FCF) in Iraq for the period (2015-2024): The statement of cash flows, which is now required for businesses to prepare as a crucial component of their financial statements for each period for which financial statements are submitted, comes in fourth place after the statements of financial position (balance sheet), income statement (profit and loss statement), and changes in equity. Because the flow statement shows the cash impact of all the activities the company carried out during the financial period, along with an indication of the nature of these impacts, such as cash flows in or out of the company, it is essential for assessing the strengths and weaknesses of the company in terms of its ability to generate cash element that will be used to pay obligations, finance expansions, and distribute profits.  both soon and in the distant future. The following table provides an illustration of Iraq's operational, investment, and finance cash flows to public revenues from 2004 to 2020:

The (Table 1) makes it evident that the typical operating flows were (10985.8) billion dinars, the average investment flows were (8899) billion dinars, and the average financing flows were (6674.4) billion dinars, so the total cash flows were (10985.8) billion dinars.

Measuring the financial performance indicators in the Iraqi General Tax Authority for the period (2015-2024)

Financial performance indicators are measurable metrics that provide basic information about a company's financial performance and suggest potential directions for improvement. These indicators help measure the effectiveness and financial viability of any organization. They are useful in planning and development to ensure that the business becomes more financially strong. KPIs are most powerful when they are used to assess and analyses the trends of an economic unit and the time frame required to achieve them, such as measuring progress against targets or comparing the work of the economic unit with its counterpart from similar units, and when used in combination with other types of key performance indicators to develop a more complete perception of the work of the economic unit. As for the financial key performance indicators, they have high-level standards and measures related to a specific financial percentage or value, as they measure all the company's financial information and statements in general, including profits, expenses, revenues, etc., and also focus on analyzing percentages and relationships derived from accounting data and the economic unit in particular in the form through which financial objectives can be achieved. The following table provides clarification on the Iraqi General Tax Authority's financial performance metrics for the 2015–2024 period in billions of dinars.

The (Table 2) shows that the average ratio of tax revenues to public revenues for the period from 2015 to 2024 was (4.40%), and the average growth rate of public tax revenues was (35.74%) during the research years.

Table 1:   Operational, investment and FCF in Iraq for the period (2015-2024) billion dinars

Table 2:   Iraqi General Tax Authority financial performance metrics for the 2015–2024 timeframe: billions of dinars

The reality of tax revenues in the Iraqi General Tax Authority

After oil revenues, tax revenues are believed to be the second largest source of funding for public revenues in Iraq. Governments obtain tax income through the imposition of taxes. Taxes come in a variety of forms, and so do the ways in which they are collected. Moreover, tax collection agencies could not be a part of the national government. Nonetheless, there might be another third party authorized to collect taxes in order to generate income that helps fund the state budget. This third party would be dedicated to using tax laws as effectively as possible in order to collect the amounts collected, find new revenue streams, and broaden the tax base in order to lower tax evasion. During most of the study period, the absolute amount of these revenues increased at a positive growth rate of 244.2, rising from 109.87 billion dinars in 2004 to 2821.32 billion dinars in 2009. The reason for this increase is due to the cessation of military activities and the removal of urban areas at all border crossings, as they significantly increased the amount of import trade, but it decreased to half of what it was in 2009 (1292.10) and 2011 (1491.29) billion dinars, respectively. This decrease is a result of the Iraqi economy, in 2012, rising again to more than 2135.11 billion dinars, and the recovery of the local market is a result of the stability of the economy and the increase in public spending. In addition to the increasing purchasing power of the public, one of the main reasons for this improvement in tax revenues was the increase in indirect taxes imposed on commercial activities, especially imports. This decline may have been due to the Iraqi economy being exposed to two twin shocks: the first was the decline in oil prices on international markets, and the second was the decline in oil prices on international markets. The closure of indirect taxes on commodity imports led its.

The following table provides clarification on Iraq's tax collections and their proportion to state income for the years 2004–2020:

In Table 3 it can be seen that there is a noticeable variation in the growth rate of tax revenues during the years from 2004 to 2020, specifically, in 2004 and 2005, the growth rate grew significantly, exceeding 144% and 26.2% respectively, and the increase in tax revenue growth rates can be attributed to the increase in the volume of imports compared to previous years. But after these years, growth rates declined and most years witnessed negative growth rates.

Table 3:   Tax revenues and their ratio to public revenues in Iraq for the period (2015-2024) billion dinars

Although tax revenues in 2004 recorded approximately (0.48%) and did not exceed the limits of (7%), the high volume of tax revenues as shown in the table above does not negate their relative importance in the total public revenues, which are still very high. Weak and unstable. throughout the time frame (2004-2020). As for direct taxes, we see that they reached their peak during the amount of 3229.5 billion dinars in 2016 and represent the highest contribution during the year at 0.84%, and until then since 2005, these taxes have increased significantly by 0.65%, and since these taxes recorded the minimum total tax revenue, their relative contribution began to change.

Measuring the correlation and impact relationships between the research variables and hypothesis testing

The correlation coefficient (Pearson) between the cash flow variable, the financial performance variable and the tax revenue value variable can be exemplified done the following table.

It is noted through the above table that the correlation coefficient ((Pearson) between the variable of cash flows and the variable of tax revenues was (0.906), and this indicates that there is a robust encouraging association between the two variables, and it is noted through the table above that the correlation coefficient (Pearson) Between the financial performance variable and the tax revenue variable was (0.919), and this indicates that there is a robust optimistic association between the two variables, meaning that improving cash flows and improving financial performance will lead to improving tax revenues in the Iraqi General Tax Authority. Thus, emphasis will be placed on improving both cash flows and financial performance (Table 4).

The following table provides clarification on the estimation of the regression parameter's value, the value of t, and the significance of the relationship between the cash flow and tax revenue variables.

The t-test value was 21.255, and the regression parameter's value was 0.943, based on the statistical program results shown in the above table. The alternative hypothesis that is, that there are significant impact relationships between the cash flow and tax revenue variables is accepted, and the null hypothesis is rejected, according to these results, which are significant at the 5% and 1% levels of significance. 

The estimation of the regression parameter's value, the value of t, and the significance of the correlation between the variables measuring tax revenue and financial performance are shown in the following table (Table 5).

Table 4: Pearson correlation coefficient between the cash flow variable, the financial performance variable and the tax revenue value variable

Source: Researcher preparation based on SPSS-26

Table 5: Calculate the significance between the cash flow and tax revenue variables, as well as the values of the regression parameter and t

Source: Researcher preparation based on SPSS-26, a: Dependent Variable: Tax Revenue

• When assessing the economic unit's cash liquidity, cash is a source of special concern. In order for the cash balance to match the start and end of the period, the statement of cash flows is a list that displays cash receivables, cash payments, and net change in cash through operating, investment, and financing activities.

• By providing information about cash flows, the cash flow statement enables readers of financial statements to identify principles and pillars that aid in evaluating the company's ability to generate cash, identifying its areas of use and timing, and determining the degree of certainty surrounding its future success.

• The ability of an economic unit to produce income is known as financial performance, which gauges how well a business uses its assets to produce income. The way economic units use their resources to create income is demonstrated by the financial performance of businesses.

• Tax revenue is money that governments collect from companies and individuals and are used to finance public expenditures. Tax revenues depend on the profits made by companies; increased profits lead to an increase in taxes paid.

• Cash flows directly affect the financial performance of companies, which is ultimately reflected in the tax revenues collected by governments. Therefore, understanding this relationship is vital for both economic units and governments to achieve financial sustainability.

Recommendations

• The need for the companies' managements to rely mainly on the declaration of cash flows to know their actual financial position and their real ability to meet their obligations and pay cash dividends.

• Preparing the cash flow statement in detail, with the need to determine the net cash flow from operating activities, investment activities and financing activities, as well as determining the net cash flow during the period by grouping the net cash flows for the three activities contained in the cash flow statement.

• Monitor the flow of funds both within and outside the economic unit, including cash flows for operations, investments, and financing. A company's cash flows show how well-equipped it is to pay its debts, make growth investments, and share profits.

• Work to improve the ability of the economic unit to achieve profits and efficiency in the management of its resources. It is usually measured by indicators such as net profit, return on assets and return on equity. Financial performance is closely related to cash flows; companies with good cash flows often have strong financial performance.

• Businesses that perform well financially and have robust cash flows are better able to pay taxes, which raises state tax collections. This is due to the fact that, in addition to providing information about cash flows, the cash flow statement assists users of financial statements in identifying the guidelines and underlying principles that help ascertain the economic unit's capacity to produce cash and pinpoint its areas of application.

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