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On the Use of Information Theory Concepts in the Analysis of Financial Statements

Chapter
Part of the Advanced Studies in Theoretical and Applied Econometrics book series (ASTA, volume 25)

Abstract

Balance sheets and income statements are numerical decompositions of certain total sums: total assets, total liabilities, total sales, and total costs and expenses. The behavior of individual items measured as fractions of the corresponding total is important for the analysis of the company’s financial position. It will be argued in this article that certain concepts derived from information theory are useful as summarizing descriptive devices for changes in such fractions as well as for the analysis of differences between companies of the same industry.

Keywords

Posterior Probability Mutual Information Prior Probability Total Asset Balance Sheet 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. Hartley, R.V.L.: 1928, “Transmission of Information,” Bell System Technical journal, 7, 535–563.Google Scholar
  2. Shannon, C.E.: 1948, “A Mathematical Theory of Communication,” Bell System Technical Journal, 27, 379–423.Google Scholar
  3. Shannon, C.E.: 1948, “A Mathematical Theory of Communication,” Bell System Technical Journal, 27, 623–656.Google Scholar
  4. Theil, H.: 1967, Economics and Information Theory, Rand McNally and Co. and North-Holland Publishing Company, Chicago and Amsterdam.Google Scholar
  5. Theil, H. and A.J. Finizza: 1967, “An Informational Approach to the Measurement of Racial Segregation of Schools,” Report 6712 of the Center for Mathematical Studies in Business and Economics, The University of Chicago.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 1992

Authors and Affiliations

  1. 1.The University of ChicagoChicagoUSA

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