search query: @author Lawson, R. A. / total: 5
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| Author: | Brief, R. P. Lawson, R. A. |
| Title: | Approximate error in using accounting rates of return to estimate economic returns |
| Journal: | Journal of Business Finance and Accounting
1991 : JAN, VOL. 18:1, p.13-20 |
| Index terms: | ACCOUNTING RATIOS RATE OF RETURN SIMULATION TIME |
| Language: | eng |
| Abstract: | The error term in the equation of the relationship between accounting and economic rates of return is simplified and an approximation is derived. Simulations indicate that for short time periods, the error can be enormous. Over longer periods, and under certain conditions, the error can be much smaller. The critical factor affecting the error is the book value/economic value ratio at the beginning and at the end of the time horizon. There is a need for a greater understanding of the analytical properties of rate of return relationships and the importance of the concept of comprehensive income in deriving these relationships. |
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