Abstract Reviews the book "Accounting Theory," by Kenneth S. Most.

Abstract This article presents a reply to the comments on the usefulness of financial ratios to investors in common stock in the U.S. Emphasis has been placed on the intention that ratios be considered only a first step in the total evaluation of the usefulness of financial ratios to investors. Within this framework the research design and testing were appropriate. The conclusion of ratios should not be taken from the context and limitations of the models and methodology of the study. To do so increases the risk of attaching greater weight to the conclusion than was ever contemplated by the research.

Abstract The article examines the usefulness of financial ratios to investors in common stock. It was assumed that the formation of expectations about future rate of return rankings was significant to investors. Thus, the explanatory relationships found to exist between financial ratios and rate of return on investment in common stock were tested for ability to predict rate of return rankings. By moving from unadjusted rate of return to market adjusted rate of return, strong evidence of a market effect on the rate of return yielded by a common stock was found.

Abstract Reviews the book "Current Cost Accounting: Its Aspects and Impacts," edited by Adolf J.H. Enthoven.

Abstract This article presents information on evaluating alternative methods of accounting for long-term nonsubsidiary holdings of common stock. Long-term investments by one corporation (investor) in the common stock of another corporation (investee) can be classified in one of two basic categories according to the percentage of the common stock of the investee corporation held by the investor corporation. Holdings of more than 50 percent are classified as subsidiary holdings while holdings of 50 percent or less are classified as nonsubsidiary holdings. Under the cost method, "periodic investor income" consists of dividends received by the investor which are distributed from the investor's proportionate share of undistributed investee earnings accumulated since the acquisition of the investment. The book value of the investment on the investor's books, hereafter referred to as "investment carrying value," is periodically reduced by any dividends received in which distributions in excess of investee earnings since acquisition of the investment. Such dividends are referred to in this paper as "excess dividends." Finally, Opinion 18 states that a senes of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary and should accordingly be recognized.

Abstract Reviews the book "Introduction to Modern Accounting," by Ronald J. Thacker.

Abstract In the April 1975 issue of "The Accounting Review," an article reported the results of an empirical study in there was an attempt to, assess the relative effect which the successful efforts (SE) vs. full cost (FC) method of accounting for exploration costs has on various accounting variables of firms in the extractive petroleum industry and compare the market response to the different accounting numbers generated under these alternative accounting procedures. The objectives of the present paper are to point out certain conceptual ambiguities and logical inconsistencies in the article's analysis, identify several important factors which the article failed to consider in its research design and demonstrate by way of additional research how these factors may have affected the results. In summary, it is believed that empirical evidence with respect to the price effects of the FC vs. SE choice is extremely important and timely given that both the SEC and the FASB currently are considering the subject of accounting in the extractive industries.