Download or read book Accrued Earnings and Growth written by Patricia M. Fairfield and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: An important goal of accounting research is to provide evidence that improves the analysis of financial statements for predicting future profitability. Research (Sloan 1996; Xie 2001) has found that (1) the persistence of earnings performance depends on the proportions of the cash and accrual components and that (2) a market inefficiency results from the failure of investors to fully appreciate the implications of cash flows and accruals for future earnings performance. In this study we investigate whether these results with respect to accruals can be generalized to another form of growth in net operating assets. We find that growth in long-term net operating assets, like accruals, has a negative association with one-year-ahead return on assets. We also find that the negative associations of both forms of growth (accruals and growth in long-term net operating assets) to one-year-ahead return on assets are attributable to the effect of growth on the denominator of return on assets. Furthermore, we find that the apparent market mispricing of accruals applies to growth in long-term net operating assets and that the severity of the mispricing does not significantly differ between the components of growth. Thus, the results suggest that the accrual anomaly documented in Sloan (1996) is a subset of a larger anomaly with respect to a general market mispricing of growth in net operating assets. Statement Analysis, Market Mispricing.

Download or read book Accrued Earnings and Growth written by Patricia M. Fairfield and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research reveals that the accrual component of profitability is less persistent than the cash flow component, and that investors fail to fully appreciate their differing implications for future profitability (Sloan 1996). However, accruals are a component of growth in net operating assets as well as a component of profitability. Just as we can disaggregate profitability into accruals and cash flows from operations, we can disaggregate growth in net operating assets into accruals and growth in long-term net operating assets. We find, after controlling for current profitability, that both components of growth in net operating assets - accruals and growth in long-term net operating assets - have equivalent negative associations with one-year-ahead return on assets. This result is consistent with conservative accounting and diminishing marginal returns on investments. We also find, after controlling for current profitability, that the market appears to equivalently overvalue accruals and growth in long-term net operating assets relative to their association with one-year-ahead ROA. Our evidence suggests that the accrual anomaly documented in Sloan (1996) is a special case of what could be viewed as a more general growth anomaly.

Download or read book Earnings Earnings Growth and Value written by James A. Ohlson and published by Now Publishers Inc. This book was released on 2006 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings, Earnings Growth and Value presents a model of earnings and dividends leading up to the core principle that growth in earnings explains the price to forward-earnings ratio. This model is referred to as the OJ (Ohlson and Jeuttner-Nauroth) model. The OJ model takes into account two growth measures of earnings -- the near term and the long term -- to explain the price to forward-earnings ratio. Further, the model allows for a broad set of dividend policies. Earnings, Earnings Growth and Value starts from the basics and derives the valuation formula which shows how value depends on earnings and their growth. Some of the topics developed here are include dividend policy irrelevancy (DPI), how one extends the model to incorporate an underlying information dynamic, accounting rules and their influence on the model, and ways in which the model can be extended to reflect operating vs. financial activities. Earnings, Earnings Growth and Value should be required reading for researchers in accounting and finance with an interest in accounting theory, equity valuation and financial accounting.

Download or read book Reconciling Growth and Persistence as Explanations for Accrual Mispricing written by Paul Hribar and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the circumstances under which a growth explanation or a persistence explanation is a more likely explanation for accrual mispricing and whether accruals or cash from operations is a better measure of the mispricing. We hypothesize that mispricing of growth and a fixation on earnings are both descriptive of the accrual mispricing, but that they affect prices differently depending on where the firm is in its life cycle. We also hypothesize that the mispricing will have a stronger association with accruals or cash flows depending on which explanation drives the mispricing. Our results show that the orthogonal information in accruals is more related to growth characteristics, while the orthogonal information in cash flows is related to earnings persistence. Furthermore, in the growth stage, information in accruals is mispriced to a greater extent than the information in cash flows. Collectively, our results suggest that the investment-based explanation for accrual mispricing dominates in the growth stage and is best measured using accruals (and not operating cash flows). In contrast, the persistence explanation for accrual mispricing is more descriptively valid at maturity and decline, and the information contained in operating cash flows subsumes the information contained in accruals regarding earnings persistence.

Download or read book Winning on Purpose written by Fred Reichheld and published by Harvard Business Press. This book was released on 2021-12-07 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: Great leaders embrace a higher purpose to win. The Net Promoter System shines as their guiding star. Few management ideas have spread so far and wide as the Net Promoter System (NPS). Since its conception almost two decades ago by customer loyalty guru Fred Reichheld, thousands of companies around the world have adopted it—from industrial titans such as Mercedes-Benz and Cummins to tech giants like Apple and Amazon to digital innovators such as Warby Parker and Peloton. Now, Reichheld has raised the bar yet again. In Winning on Purpose, he demonstrates that the primary purpose of a business should be to enrich the lives of its customers. Why? Because when customers feel this love, they come back for more and bring their friends—generating good profits. This is NPS 3.0 and it puts a new take on the age-old Golden Rule—treat customers the way you would want a loved one treated—at the heart of enduring business success. As the compelling examples in this book illustrate, companies with superior NPS consistently deliver higher returns to shareholders across a wide array of industries. But winning on purpose isn't easy. Reichheld also explains why many NPS practitioners achieve just a small fraction of the system's full potential, and he presents the newest thinking and best practices for doing NPS right. He unveils the Earned Growth Rate (EGR): the first reliable, complementary accounting measure that can truly leverage the power of NPS. With keen insight and moving personal stories, Reichheld advances the thinking and practice of NPS. Winning on Purpose is your indispensable guide for inspiring customer love within your own teams and using Net Promoter to achieve both personal and business success.

Download or read book Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation to 25 Pages 26 to 50 Pages 51 to 75 Pages 76 to 100 Pages 101 to 120 written by Amy Yunzhi Zang and published by ProQuest. This book was released on 2000 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Profitability of the Accrual Components of Earnings written by Robin Leah Tarpley and published by . This book was released on 2002 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book It s Earnings that Count written by Hewitt Heiserman and published by McGraw Hill Professional. This book was released on 2004 with total page 239 pages. Available in PDF, EPUB and Kindle. Book excerpt: An innovative technique for seeing through a company's published numbers to discover its true investment potential.

Download or read book The Implications of Accounting Distortions and Growth for Accruals and Profitability written by Scott A. Richardson and published by . This book was released on 2005 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Following Sloan (1996), numerous studies show that the accrual component of earnings is less persistent than the cash flow component of earnings. Disagreement exists, however, as to the explanation for this result. Xie (2001) attributes the result to managerial discretion. Fairfield et al. (2003a) argue that it is a special case of a more general growth anomaly that is attributable to the widespread use of conservative accounting methods and/or diminishing marginal returns to new investment. Finally, Dechow and Dichev (2002) and Richardson et al. (2004) argue that it is attributable to transitory accrual estimation error. In this paper, we provide theory and evidence to discriminate between these alternative explanations. Our analysis suggests that transitory accrual estimation error provides the most consistent explanation for the lower persistence of the accrual component of earnings. Further, our results suggest the accrual estimation error is at least partially attributable to managerial discretion.

Download or read book Expected Earnings Growth When There is a Growth Option written by Kenton K. Yee and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: How does the presence of a growth option affect expected earnings growth? This paper analyzes a firm with one growth option and an accrual accounting policy that, in the absence of a growth option, would equate accounting earnings to Hicksian earnings. Under this accounting policy, the presence of a growth option induces abnormal earnings growth and increases the long run growth rate of expected earnings. Further analysis links the long run growth rate of expected earnings to the option-exercise strategy and the expected lifespan of the option. Implications concerning the relationship between Ramp;D investment, analysts' long run forecasts, and equity valuation are discussed.

Download or read book Capital and Rates of Return in Manufacturing Industries written by George Joseph Stigler and published by . This book was released on 1975 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Accruals Investment and the Accrual Anomaly written by Frank Zhang and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates two competing hypotheses for the accrual anomaly: investment/growth and persistence. Both investment/growth and persistence information in accruals are likely to vary cross-sectionally, depending on a firm's business model, a fact that generates different cross-sectional implications for the accrual anomaly. I find that the magnitude of the accrual anomaly monotonically increases with the investment information contained in accruals, as measured by the co-variation between accruals and employee growth. In industries/firms in which accruals co-vary with employee growth, accruals show strong predictive power for future stock returns. In industries/firms in which accruals show little correlations with employee growth, the accrual anomaly is much weaker. In contrast, the evidence from the cross-sectional analysis is inconsistent with the persistence argument. From the earnings perspective, the evidence on one-year-ahead earnings growth is inconclusive, but the results on longer-term earnings growth support the investment argument but not the persistence argument. Collectively, I conclude that these results support the view that the accrual anomaly is attributable to the fundamental investment information contained in accruals.

Download or read book Accounting Trends and Techniques U S GAAP Financial Statements Best Practices in Presentation and Disclosure written by AICPA and published by John Wiley & Sons. This book was released on 2017-12-04 with total page 800 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updated for new accounting and auditing guidance issued, this valuable tool provides hundreds of high quality disclosure examples from carefully selected U.S. companies of different sizes, across industries such as banking, credit and insurance, communication services, and healthcare from such organizations as Scotts Miracle-Gro, Coca-Cola, Caterpillar, and BB&T. Illustrations of the most important, immediate, and challenging disclosures, such as derivatives and hedging, consolidations, and fair value measurement are provided. Hot topics include statement of cash flows, going concern, and business combinations and intangibles. This edition also provides clear, direct guidance to help you understand and comply with all significant reporting requirements and detailed indexes to help you quickly find exactly what you need.

Download or read book Accounting for Corporate Retained Earnings written by David Green and published by Ayer Publishing. This book was released on 1980-01-01 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Accruals Managerial Operating Decisions and Firm Growth written by Michelle Liu and published by . This book was released on 2018 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the most crucial yet controversial issues in executive performance evaluation is disentangling which managerial decisions reflect the firm's economic position versus opportunistic earnings management. I explore this issue and find evidence that specific managerial policies often used by growing firms are likely to be identified as upward earnings management by widely-used annual accrual expectation models. I find that incorporating linear and non-linear growth measures (for various assets and from a growth factor) into these models increases the explanatory power by 1.01% to 9.86%. Models with asset growth, receivables growth, and a growth factor generate the lowest Type I error rates, while models with asset growth, operating cycle, and a growth factor generate the lowest Type II error rates. In re-examined tests of upward earnings management around IPOs, inferences change after controlling for growth. I make empirical suggestions to help distinguish growth from opportunism in tests of earnings management.

Download or read book Accrual Reversals Earnings and Stock Returns written by Eric J. Allen and published by . This book was released on 2015 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document pervasive evidence of reversals in firm-level working capital accruals over adjacent fiscal years. We demonstrate that the majority of these accrual reversals relate to 'good' accruals that: (i) correctly anticipate future benefits; (ii) lead to higher earnings persistence; and (iii) are not associated with security mispricing. We show that the lower persistence of the accrual component of earnings and associated mispricing documented in Sloan (1996) are driven by a combination of accruals related to firm growth and accrual estimation error.

Download or read book The Effects of Firm Growth and Model Specification Choices on Tests of Earnings Management written by Daniel W. Collins and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Commonly used Jones-type discretionary accrual models applied in quarterly settings do not adequately control for nondiscretionary accruals that naturally occur due to firm growth. We show that the relation between quarterly accruals and backward-looking sales growth (measured over a rolling four-quarter window) and forward-looking firm growth (market-to-book ratio) is non-linear. Failure to control for the effects of firm growth and performance on innate accruals leads to excessive Type-I error rates in tests of earnings management. We propose simple refinements to Jones-type models that deal with non-linear growth and performance effects and show that the expanded models are well specified and exhibit high power in quarterly settings where one is testing for earnings management. The expanded models are able to identify the presence of earnings management in a sample of restatement firms. Our findings have important implications for the use of discretionary accrual models in earnings management research.