There is a large earnings management literature in accounting devoted to the study of accruals. Depending on how the accruals are reported the reported earnings change. Another thing that can be managed in addition to the accruals are the loss reserves for banks and insurance companies and the list continiues. Cash-flow based measures are always better than accrual based measures in my view. Also, if the denominator contains values of some intangible assets such as goodwill, brands and the like, the measured profits get noisier.
Best, Sabri On 11/5/11, Sabri Oncu <[email protected]> wrote: > Shane: > >> The measure of (in Marxian terms) "profit" comprises, on an after-tax >> basis: net rental income, net interest income, total executive salaries, >> total dividend income, and (net of properly computed capital >> consumption) >> corporate retained earnings. > > For us mathematicians such words as "properly computed" are vague. > > What does "properly computed" mean? > > I am sure lawyers and regulators can find an answer. If you don't > believe me, just read Basel I, II and III or GAAP (Generally Accepted > Accounting Principles). > > Best, > Sabri > _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
