Abstract
The major underlying hypothesis of this contribution is that the elements of business policy of a company which influence its return on equity are different across industries. These elements are measured by accounting ratios. The accounting ratios that could best explain the return on equity are chosen mostly by theoretical considerations. Simple nonlinear functional dependencies of the risk adjusted return on equity on each of the ratios are determined on the basis of theoretical considerations and statistical relevance. The determined functions of accounting ratios are then used in a multiple nonlinear regression to find the absolute and relative importance of the ratios in each industry separately. The empirical testing of the major hypothesis is performed on selected Slovenian industries.
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Supported in part by the Ministry of Science and Technology of Slovenia.
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Mramor, D., Kosta, N.M. (1997). Accounting Ratios as Factors of Rate of Return on Equity. In: Zopounidis, C. (eds) New Operational Approaches for Financial Modelling. Contributions to Management Science. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-59270-6_25
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DOI: https://doi.org/10.1007/978-3-642-59270-6_25
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