Article1971

The Measurement of Corporate Rates of Return: A Generalized Formation

92 citations0/0 files storedThe Bell Journal of Economics and Management Science

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Financial Reporting and Valuation Research Financial Analysis and Corporate Governance Capital Investment and Risk Analysis

Abstract

General conditions are derived under which accounting ratios, such as the conventionally defined accounting rate of return, deviate from the economic rate of return for a firm. Cash revenue streams of arbitrary time-shape, non-depreciable capital, and corporate income taxes are considered. The sign and magnitude of the bias in the accounting rate of return depend upon the depreciation schedule, the revenue timestream, the firm's growth rate, and its capital structure.

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1964Tax Deductibility of Economic Depreciation to Insure Invariant Valuations 1937Some Aspects of the Pure Theory of Capital

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1983The Validity of Profits-Structure Studies with Particular Reference to the FTC's Line of Business Data 2005Earnings Components, Accounting Bias and Equity Valuation 1989An expository note on depreciation and profitability under rate-of-return regulation 2009Depreciation Rules and the Relation between Marginal and Historical Cost 1974Accounting Rate of Return vs. Economic Rate of Return 1998Regulating Prices to Equal Forward-Looking Costs: Cost-Based Prices or Price-Based Costs?1999The effect of accounting firm mergers on international markets for accounting services 1996Using accounting data to measure the economic performance of firms

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