DuPont analysis, a common form of financial statement analysis, decomposes return on net operating assets into two multiplicative components: profit margin and asset turnover. These two accounting ratios measure different constructs and, accordingly, have different properties. Prior research has found that a change in asset turnover is positively related to future changes in earnings. This paper comprehensively explores the DuPont components and contributes to the literature along three dimensions. First, the paper contributes to the financial statement analysis literature and finds that the information in this accounting signal is in fact incremental to accounting signals studied in prior research in predicting future earnings. Second, it contributes to the literature on the stock market's use of accounting information by examining immediate and future equity return responses to these components by investors. Finally, it adds to the literature on analysts' processing of accounting information by again testing immediate and delayed response of analysts through contemporaneous forecast revisions as well as future forecast errors. Consistent across both groups of market participants, the results show that the information is useful as evidenced by associations between the DuPont components and stock returns as well as analyst forecast revisions. However, I find predictable future forecast errors and future abnormal returns indicating that the information processing does not appear to be complete. Taken together, the analysis indicates that the DuPont components represent an incremental and viable form of information about the operating characteristics of a firm.

Reviews the book "The Australian Accounting Standards Review Board: The Establishment of Its Participative Review Process," by Asheq Razaur Rahman.

Reviews the book "Accounting for Data Processing Costs," by Robert W. McGee.

This study examines the joint effect of perquisite disclosure regulations and enforcement policies on changes in cash salary and bonus compensation paid to chief executive officers. It is hypothesized that the combined effect of an SEC perquisite disclosure requirement and the IRS policy of taxing perquisites as income causes a shift from perquisites to monetary compensation. A regression model is used to assess the changes in real compensation. The findings support the hypothesis that a change in the chief executive officers' compensation occurred as a result of the disclosure requirement and tax policies.

[This study examines the joint effect of perquisite disclosure regulations and enforcement policies on changes in cash salary and bonus compensation paid to chief executive officers. It is hypothesized that the combined effect of an SEC perquisite disclosure requirement and the IRS policy of taxing perquisites as income causes a shift from perquisites to monetary compensation. A regression model is used to assess the changes in real compensation. The findings support the hypothesis that a change in the chief executive officers' compensation occurred as a result of the disclosure requirement and tax policies.]

[The primary purpose of the study is to provide evidence on the characteristics of firms which did and did not disclose management's annual earnings forecasts in the Wall Street Journal. The study finds that earnings variability is greater for non-disclosing firms while firm size is larger for disclosing firms. Systematic market risk was not significantly different between the two groups of firms. To the extent that earnings variability and firm size influence forecast accuracy and information content, the results reported in this study suggest that the accuracy and information content of voluntarily disclosed forecasts may not be representative of the accuracy and information content of the forecasts of currently non-disclosing firms if forecasts for these firms become required.]

The primary purpose of the study is to provide evidence on the characteristics of firms which did and did not disclose management's annual earnings forecasts in the Well Street Journal. The study finds that earnings variability is greater for non-disclosing firms while firm size is larger for disclosing firms. Systematic market risk was not significantly different between the two groups of firms. To the extent that earnings variability and firm size influence forecast accuracy and information content, the results reported in this study suggest that the accuracy and information content of voluntarily disclosed forecasts may not be representative of the accuracy and information content of the forecasts of currently nondisclosing firms if forecasts for these firms become required.

This paper demonstrates that the treatment of self-services, their inclusion or exclusion, affects neither the decision relevance of the information made available by the reciprocal method of cost allocation nor the internal versus external acquisition decision made through the underlying technology matrix. Three propositions and proofs are provided, showing that there is a one-to-one transformation between the two treatments of self-services in each of the analyses.

The article presents a comment on the effect of chance variation on revenue and cost estimations for breakeven analysis. In traditional breakeven analysis, total revenue and total cost are represented by straight lines with one intersection which indicates the breakeven quantity output. The effect of quadratic revenue and cost curves on breakeven analysis was introduced. Two breakeven points for the quadratic model were derived by solving for the levels of output at which the regressed total revenue equals total cost. Regardless of whether a linear or non-linear breakeven model may be appropriate, however, the revenue and cost functions are often unknown. Givens illustrated the regression analysis, but did not consider the effect of regression forecasting errors. In order to resolve the above issue an attempt was made to demonstrate the determination of what he called "the chance variation" in estimated revenue and cost functions; and to illustrate how these chance variations affect the results of a breakeven analysis. The estimated cost-volume functions were subtracted from the estimated revenue-volume functions to derive an estimated profit-volume function.

To draw conclusions about the information content of audit reports, one must isolate the effects of information conveyed specifically by audit-report components of aggregate signals. To do so, the information conveyed by other components of the aggregates must be controlled. This paper argues that, for most types of audit reports, the necessary control cannot be exercised with security-price research methods Accordingly, some inappropriate inferences have been drawn about the information content of certain types of opinions. Research strategies to provide and implement the necessary control are suggested.