
                              - 27 -



REFERENCES

2.1. Functional Form of Financial Ratios
----------------------------------------

Barnes, P. (1986), "The statistical validity of the ratio method in
financial analysis: an empirical examination: a comment", Journal of
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Berry, R.H., and Nix, S. (1991), "Regression analysis v. ratios in
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Booth, G., Martikainen, T., Perttunen, J., and Yli-Olli, P. (1994),
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Ezzamel, M., Mar-Molinero, C., and Beecher, A. (1987), "On the
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Fieldsend, S., Longford, N., and McLeay, S. (1987), "Industry
effects and the proportionality assumption in ratio analysis: a
variance component analysis", Journal of Business Finance and
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Kuh, E., Meyer, J.R. (1955), "Correlation and regression estimates
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Lee, C.-W.J. (1985), "Stochastic properties of cross-sectional
financial data",  Journal of Accounting Research 23/1, 213-227.

Lev, B., and Sunder, S. (1979), "Methodological issues in the use of
financial ratios", Journal of Accounting and Economics 1/3, 187-210.

McDonald, B., and Morris, M.H. (1984), "The statistical validity of
the ratio method in financial analysis: an empirical examination",
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McDonald, B., and Morris, M.H. (1985), "The functional specification
of financial ratios: an empirical examination", Accounting and
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McDonald, B., and Morris, M.H. (1986), "The statistical validity of
the ratio method in financial analysis: an empirical examination: a
reply", Journal of Business Finance and Accounting 13/4, 633-635

McLeay, S., and Fieldsend, S. (1987), "Sector and size effects in
ratio analysis: an indirect tests of a ratio proportionality",
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Perttunen, J., and Martikainen, T. (1989), "On the proportionality
assumption of financial ratios", Finnish Journal of Business
Economics 38/4, 343-359.

                              - 28 -



Perttunen, J., and Martikainen, T. (1990), "Distributional
characteristics and proportionality of marked-based security
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Triqueiros, D. (1992), "The cross-sectional characterization of
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Whittington,  G. (1980), "Some basic properties of accounting
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2.2. Distributional Characteristics of Financial Ratios
-------------------------------------------------------

Barnes, P. (1982), "Methodological implications of non-normally
distributed financial ratios", Journal of Business Finance and
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Barnes, P. (1983), "Methodological implications of non-normally
distributed financial ratios: a reply", Journal of Business Finance
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Bird, R.G., and McHugh A.J. (1977), "Financial ratios - an empirical
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Bougen, P.D., and Drury, J.C. (1980), "U.K. statistical
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Buckmaster, D., and Saniga E. (1990), "Distributional forms of
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Buijink, W., and  Jegers, M. (1986), "Cross-sectional distributional
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Deakin, E.B. (1976), "Distributions of financial accounting ratios:
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Ezzamel, M., Brodie, J., and Mar-Molinero, C. (1990), "The
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Frecka, T.J., and Hopwood, W.S. (1983), "The effects of outliers on
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Horrigan, J.O. (1983), "Methodological implications of non-normally
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Karels, G.V., and Prakash, A.J. (1987), "Multivariate normality and
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                              - 29 -



Kolari, J., McInish, T.H., and Saniga, E.M. (1989), "A note on the
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Ledford, M.H., and Sugrue, P.K. (1983), "Ratio analysis: application
to U.S. motor common carriers", Business Economics, September 1983,
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Martikainen, T. (1990), "On the non-normalities of cross-sectional
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Martikainen, T. (1991), "A note on the cross-sectional properties of
financial ratio distributions", Omega 19/5, 498-501.

Martikainen, T. (1992), "Time-series distributional properties of
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McLeay, S. (1986a), "Students' t and the distribution of financial
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McLeay, S. (1986b), "The ratio of means, the means of ratios and
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Mecimore, C.D. (1968), "Some empirical distributions of financial
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Smith, D.B., and Pourciau, S. (1988), "A comparison of the financial
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So,  J.C. (1987), "Some empirical evidence on the outliers and the
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Tippet, M. (1990), "An induced theory of financial ratios",
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Virtanen, I., and Yli-Olli, P. (1989), "Cross-sectional and
time-series persistence of financial ratio distributions; Empirical
evidence with Finnish Data", European Institute for Advanced
Studies in Management, Working paper 89-04, Brussels.


2.3. Classification of Financial Ratios
---------------------------------------

Aho, T. (1980), "Empirical classification of financial ratios",
Management Science in Finland 1980 Proceedings, ed. C.Carlsson.



                              - 30 -




Bayldon, R., Woods, A., and Zafiris, N. (1984), "A note on the
pyramid technique of  financial ratio analysis of firms
performance", Journal of Business Finance and Accounting 11/1,
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Beaver, W. (1977), "Financial Statement Analysis", Handbook of
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Bernstein, L. (1989), Financial Statement Analysis: Theory,
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Brealey, R., and Myers, S. (1988). Principles of Corporate Finance.
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Chen, K.H., and Shimerda, T.A. (1981), "An empirical analysis of
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Courtis, J.K. (1978), "Modelling a financial ratios categoric
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Cowen, S.S., and Hoffer, J.A. (1982), "Usefulness of financial
ratios in a single industry",  Journal of Business Research 10/1,
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Ezzamel, M., Brodie, J., and Mar-Molinero, C. (1987), "Financial
patterns of UK manufacturing companies", Journal of Business Finance
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Fornell, C., and Larcker, D.F. (1980), "The use of canonical
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Foster, G. (1978), Financial Statement Analysis. Prentice-Hall,
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Foster, G. (1986), Financial Statement Analysis. Prentice-Hall,
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Gombola, M.J., and Ketz, J.E. (1983),  "A note on cash flow and
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Holmes, G., and Sugden, A. (1990), Interpreting Company Reports and
Accounts. University Press, Cambridge, 4Th ed.

Horrigan, J.O. (1965), "Some empirical bases of financial ratio
analysis", Accounting Review, July 1965, 558-568.



                              - 31 -




Hutchinson, P., Meric, I., and Meric, G. (1988), "The financial
characteristics of small firms which achieve quotation on the UK
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Johnson, W.B. (1978), "The cross-sectional stability of financial
patterns", Journal of Business Finance and Accounting  5/2, 207-214.

Johnson, W.B. (1979), "The cross-sectional stability of financial
ratio patterns", Journal of  Financial and Quantitative Analysis
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Kanto, A.J., and Martikainen, T. (1991), "A confirmatory test of an
a priori classification pattern of financial ratios: empirical
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Kanto, A.J., and Martikainen, T. (1992), "A test of a priori
financial characteristics of the firm", European Journal of
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Laitinen, E.K. (1983), "A multivariate model of the financial
relationship in the firm", Finnish Journal of Business Economics
32/4, 317-333.

Laurent, C.R. (1979), "Improving the efficiency and effectiveness of
financial ratio analysis", Journal of Business Finance and
Accounting 6/3, 401-413.

Lev, B. (1974a), Financial Statement Analysis; A new approach,
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Libby, R. (1975), "Accounting ratios and the prediction of failure:
some behavioral evidence", Journal of Accounting Research 13/1,
150-161.

Luoma, M., and Ruuhela, R. (1991), "Consistency and comovement of
financial ratios: a firm-specific approach", Finnish Journal of
Business Economics 1, 39-49.

Martikainen, T. (1993), "Stock returns and classification pattern of
firm-specific financial variables: empirical evidence with Finnish
data", Journal of Business Finance and Accounting 20/4, 537-557.

Pinches, G.E., and Mingo, K.A. (1973), "A multivariate analysis of
industrial bond ratings", Journal of Finance, 28/1, 1-18.

Pinches, G.E., Eubank, A.A., Mingo, K.A., and Caruthers, J.K.
(1975), "The hierarchical classification of financial ratios",
Journal of Business Research 3/4, 295-310.

Pinches, G.E., Mingo, K.A., and Caruthers, J.K. (1973), "The
stability of financial patterns in industrial organizations",
Journal of Finance, May 1973, 389-396.

                              - 32 -



Pohlman, R.A., and Hollinger, R.D. (1981), "Information redundancy
in sets of financial ratios", Journal of Business Finance and
Accounting 8/4, 511-528.

Richardson, F.M., and Davidson, L.F. (1984), "On linear
discrimination with accounting ratios", Journal of Business Finance
and Accounting 11/4, 511-525.

Salmi, T., Virtanen, I., and Yli-Olli, P. (1990), "On the
classification of financial ratios. A factor and transformation
analysis of accrual, cash flow, and market-based ratios", Acta
Wasaensia, no 25.

Salmi, T., Virtanen, I., and Yli-Olli, P. (1992), "Measuring the
generalized association between financial statements and security
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XXXI Joint International Conference, Operational Research /
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Tamari, M. (1978), Financial ratios. Analysis and prediction, Paul
Elek Ltd, London.

Yli-Olli, P., and Virtanen, I. (1985), "Modelling a financial ratio
system on the economy-wide level",  Acta Wasaensia, no 21.

Yli-Olli, P., and Virtanen, I. (1986), "Classification pattern of
financial ratios. A comparative analysis between US and Finnish
firms on the aggregate level", Finnish Journal of Business Economics
2, 112-132.

Yli-Olli, P., and Virtanen, I. (1989), "On the long-term stability
and cross-country invariance of financial ratio patterns", European
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Yli-Olli, P., and Virtanen, I. (1990), "Transformation analysis
applied to long-term stability and structural invariance of
financial ratio patterns: U.S. vs. Finnish firms", American Journal
of Mathematical and Management Sciences 10/1-2, 73-125.


3. Measurement of Profitability and Financial Ratios
----------------------------------------------------

Bhaskar, K.N. (1972), "Rates of return under uncertainty",
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Bierman, H.J. (1961), "Depreciable assets - timing of expenditure
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Brief, R.P. (1985), "Limitations of using the cash recovery rate to
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Brief, R.P., and Lawson, R.A. (1991a), "Approximate error in using
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Business Finance and Accounting 18/1, 13-20.

                              - 33 -



Brief, R.P., and Lawson, R.A. (1991b), "Approximate error in using
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Brief, R.P., and Lawson, R.A. (1992), "The role of the accounting
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Buijink, W., and Jegers, M. (1989), "Accounting rates of return:
comment", American Economic Review 79/1, 287-289.

Fisher, F.M., and McGowan, J.J. (1983), "On the misuse of accounting
rates of return to infer monopoly profits", American Economic Review
73/1, 82-97.

Fisher, F.M. (1984), "The misuse of accounting rates of return:
Reply", American Economic Review 74/3, 509-517.

Gordon, L.A. (1974), "Accounting rate of return vs. economic rate of
return", Journal of Business Finance and Accounting 1/1, 343-356.

Gordon, L.A. (1977), "Further thoughts on the accounting rate of
return vs. the economic rate of return", Journal of Business Finance
and Accounting 4/1, 133-134.

Gordon, L.A., and Hamer, M.M. (1988), "Rates of return and cash flow
profiles: an extension", Accounting Review 63/3, 514-521.

Griner, E.H., and Stark, A.W. (1988), "Cash recovery rates,
accounting rates of return, and the estimation of economic
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Harcourt, G.C. (1965), "The accountant in a golden age", Oxford
Economic Papers. New Series 17/1, 66-80.

Ijiri, Y. (1978), "Cash-flow accounting and its structure", Journal
of Accounting, Auditing and Finance (Summer 1978), 331-348.

Ijiri, Y. (1979), "Convergence of cash recovery rate", in:
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Ijiri, Y. (1980), "Recovery rate and cash flow accounting",
Financial Executive (March 1980), 54-60.

Jegers, M. (1985), "Estimating the internal rate of return from
published financial statements: a comment", Journal of Business
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Jegers, M. (1985), "The ARR-IRR controversy: a critical review and
some extensions", Paper presented at the European Accounting
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                              - 34 -



Van der Hagen, K., and Jegers, M. (1993), "Measurement of the
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Kanniainen, V., and Hernesniemi, H. (1986), "Asset structure,
indebtedness, and the rate of return on capital in a sample of
Finnish manufacturing firms", Kansantaloudellinen aikakauskirja 3,
278-288.

Kay, J.A. (1976), "Accountants, too, could be happy in a golden age:
the accountants rate of profit and the internal rate of return",
Oxford Economic Papers (New Series) 28/3, 447-460.

Kay, J.A. (1978), "Accounting rate of profit and internal rate of
return; a reply", Oxford Economic Papers 30/3, 469-470.

Kay, J.A., and Mayer, C.P. (1986), "On the application of accounting
rates of return", Economic Journal 96 (March 1986), 199-207.

Kelly, G., and Tippett, M. (1991), "Economic and accounting rates of
return: a statistical model", Accounting and Business Research
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Livingstone, J.L., and Breda Van, M.F. (1976), "Relationship between
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Livingstone, J.L., and Salamon, G.L. (1970), "Relationship between
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Long, W.F., and Ravenscraft, D.J. (1984), "The misuse of accounting
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Luckett, P.F. (1984), "ARR vs. IRR: a review and an analysis",
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Martin, S. (1984), "The misuse of the accounting rate of return:
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McHugh, A.J. (1976), "Relationship between accounting and the
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Peasnell, K.V. (1982a), "Some formal connections between economic
values and yields and accounting numbers", Journal of Business
Finance and Accounting 9/3, 361-381.

Peasnell, K.V. (1982b), "Estimating the internal rate of return from
accounting profit rates", The Investment Analyst, April, 26-31.

Ruuhela, R., Salmi, T., Luoma, M., and Laakkonen, A. (1982), "Direct
estimation of the internal rate of return from published financial
statements", Finnish Journal of Business Economics 4, 329-345.

                              - 35 -



Salamon, G.L. (1973), "Models of the relationship between the
accounting and the internal rate of return: An examination of the
methodology", Journal of Accounting Research 11/2, 296-303.

Salamon, G.L. (1982), "Cash recovery rates and measures of firm
profitability", Accounting Review 57/2, 292-302.

Salamon, G.L. (1988), "On the validity of accounting rates of return
in cross-sectional analysis: theory, evidence, and implications",
Journal of Accounting and Public Policy 7/4, 267-292.

Salmi, T. (1978), "A comparative review of the Finnish expenditure-
revenue accounting",  European Institute for Advanced Studies in
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Salmi, T. (1982), "Estimating the internal rate of return from
published financial statements", Journal of Business Finance and
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Salmi, T., Dahlstedt, R., and Luoma, M. (1985), "Improving
firm-level growth estimates by eliminating cycles", Finnish Journal
of Business Economics 4, 383-410.

Salmi, T., and Luoma, M. (1981), "Deriving the internal rate of
return from accountant's rate of profit: analysis and empirical
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Salmi, T., and Ruuhela, R. (1985), "Estimating the internal rate of
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Salmi, T., Ruuhela, R., Laakkonen, A., and Luoma, M. (1983a),
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Salmi, T., Ruuhela, R., Laakkonen, A., and Luoma, M. (1983b),
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Salmi, T., Ruuhela, R., Laakkonen, A., Dahlstedt, R., and Luoma, M.
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Salmi T., and Ruuhela, R. (1993), "Comment: Measurement of the
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                              - 36 -



Sarnat, M., and Levy, H. (1969), "The relationship of rules of thumb
to the internal rate of return: a restatement and generalization",
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Shinnar, R., Dressler, O., Feng, C.A., and Avidan, A.I. (1989),
"Estimation of the economic rate of return for industrial
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Solomon, E., and Laya, J.C. (1967), "Measurement of company
profitability: some systematic errors in the accounting rate of
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Solomon, E. (1966), "Return on investment: the relation of
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Stark, A.W. (1982), "Estimating the internal rate of return from
accounting data - a note", Oxford Economic Papers (New Series) 34/3,
520-525.

Stark, A.W. (1987), "On the observability of the cash recovery
rate", Journal of Business Finance and Accounting 14/1, 99-108.

Stark, A.W., Thomas, H.M., and Watson, I.D. (1992), "On the
practical importance of systematic error in conditional IRRs",
Journal of Business Finance and Accounting 19/3, 407-424.

Stark, A.W. (1994), "Some analytics of why conditional IRRs can
contain growth rate related measurement error", Journal of Business
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Stauffer, T.R. (1971), "The measurement of corporate rates of
return: a generalized formulation", Bell Journal of Economics and
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Steele, A. (1986), "A note on estimating the internal rate of return
from published financial statements", Journal of Business Finance
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Stephen, F.H. (1976), "On deriving the internal rate of return from
the accountant's rate of return", Journal of Business Finance and
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Swalm, R.O. (1958), "On calculating the rate of return on
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Tamminen, R. (1976), A Theoretical study in the profitability of the
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Vatter, W.J. (1966), "Income models, book yield and the rate of
return", Accounting Review 41/4, 681-698.


                              - 37 -



Whittington, G. (1979), "On the use of the accounting rate of return
in empirical research", Accounting and Business Research (Summer
1979), 201-208.

Wright, F.K. (1978), "Accounting rate of profit and internal rate of
return", Oxford Economic Papers 30/3, 464-468.
