A Price Waterhouse survey has revealed an increasing number of institutional investors are using cash flow to evaluate the performance of a company before making an investment decision. It also found, however, that local companies have not been providing sufficient information in this area. 'The survey showed that 94 per cent of institutional investors in the UK and 100 per cent in Australia use cash-flow modelling to arrive at their investment decisions,' Price Waterhouse audit and business advisory partner Robert Gazzi said. The survey was aimed at exploring the approaches adopted by institutional investors to assess the performance of companies. It showed that earnings per share remained the most common valuation method for Hong Kong equity analysts and fund managers in assessing a company's performance. 'Around 90 per cent of Hong Kong equity analysts and fund managers use free cash flow to evaluate a company's performance [and] 80 per cent rank cash flow as important as earnings per share for predicting a share's value,' Mr Gazzi said. 'While earnings per share may be affected by accounting policies adopted, the cash flow is not.' Cash-flow information was more effective than earnings per share in reflecting the risks related to a company's gearing, investment in working capital and fixed assets, he said. Price Waterhouse audit and business advisory partner Silas Yang said the survey revealed local companies had not disclosed sufficient information for institutional investors to calculate cash-flow figures. 'If local companies would like to go international, they should increase their transparency by giving more information related to their cash flow,' Mr Yang said.