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Author: | Fritsche, S. R. Dugan, M. T. |
Title: | A simulation-based investigation of errors in accounting-based surrogates for internal rate of return |
Journal: | Journal of Business Finance and Accounting
1997 : JUL, VOL. 24:6, p. 781-802 |
Index terms: | COMPANY PERFORMANCE MEASUREMENT ACCOUNTING ERROR ESTIMATION RATING SCALES RATE OF RETURN |
Language: | eng |
Abstract: | In doing ex post performance evaluation of firms, it would be better to use the internal rate of return (IRR), because it is not directly observable for actual firms. Those who are interested often resort to accounting-based measures, such as the accounting rate of return, or the conditional estimate of internal rate of return. They are easy to calculate for a variety of economic entities. This paper calculates the error with which the conditional estimate of internal rate of return and the accounting rate of return estimate the internal rate of return. |
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