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This study aims to investigate the relations between long-window stock returns and prior years’ increases in DuPont identity components: profit margin and asset turnover. In particular, the authors examine the relative effectiveness of profit margin and asset turnover to predict years ahead stock returns.

To test the assertions, the authors regress raw, Capital Asset Pricing Model and Fama-French returns on controls and variables of interest, profit margin and asset turnover, lagged years t − 1, t − 2 and t − 3. To control for factors that could affect returns over the long windows, they also include returns lagged over years t − 1, t − 2 and t − 3 to coincide with the lagged profit margin and asset turnover variables of interest.

Results show a negative (positive) relation between returns and increases in lagged profit margin (asset turnover). However, the negative returns-profit margin relation is mitigated when increases in profit margin and asset turnover occur in the same lagged year.

This study adds to the existing body of research on the DuPont identity by temporally evaluating the relative long-run contributions of profit margin and asset turnover to firm value.

Purpose – We investigate the impact of CEO turnover on performance and accounting-based outcomes following major business restructurings.

Design/Methodology/Approach – We analyze a sample of 217 major operational restructurings during the period 1999–2007 using regressions and other statistical tests.

Findings – We document significant improvements in postrestructuring operating and investment efficiencies with little differentiation between restructurings that involve a change in CEO and those that involve continuing CEOs. However, we find evidence of lower accounting quality for the continuing CEO firms. First, restructuring charges of CEO turnover firms are associated with lower current period unexpected core earnings and higher future period unexpected core earnings (lower levels of classification shifting). Second, CEO turnover firms have a significantly lower percentage of (i) restructuring charge reversals and (ii) prereversal shortfalls (in meeting analyst forecast estimates) followed by reversals (suggesting lower levels of subsequent earnings management). Therefore, turnover CEOs are less likely to manipulate restructuring charges to mask true economic performance than continuing CEOs. Overall, our evidence suggests continuing CEOs undertake less substantial restructurings, while opportunistically reporting similar charges and performance improvements, consistent with attempts to pool with new CEO hires to keep their jobs.

Originality/Value – Overall, our results highlight the key economic role played by top corporate managers in major business restructurings, suggesting that CEO turnover leads to both real changes in managerial actions and altered reporting incentives.

The aim of this study is to use a financial approach based on the Du Pont expansion to investigate the impact of demographics, specialization, tenure, vertical integration, farm type, and regional location on the three levers of performance (ROE) – namely, net profit margins, asset turnover ratio, and asset‐to‐equity ratio.

This research uses a system of equations in conjunction with 1996‐2009 farm‐level data from the US Department of Agriculture's Agricultural Resource Management Survey (ARMS) to evaluate the factors driving farm‐level profitability, namely, net profit margins, asset turnover ratio, and asset‐to‐equity ratio. The methodology employed in this study corrects heterogeneity and uses repeated cross‐section estimation procedure to estimate the empirical models.

The study finds that key drivers of net profit margins are operator education, farm size and typology, specialization, and level of government payments. Key factors affecting the asset turnover ratio component of the Du Pont model include asset turnover ratio is driven by operator age, contracting, specialization, and receiving government payments. Finally, key factors affecting asset‐to‐equity ratio component of the Du Pont model are farm size, farm typology, contracting, and specialization drive asset‐to‐equity ratio.

Existing research does not examine the factors affecting returns to equity in faring at the farm‐level. Specifically, a micro‐level analysis of American farm's future structure and financial performance that accounts for the spatial and inter‐temporal dimensions of profitability has never been conducted.

Asset sales can have opposing effects on firm credit quality. On the one hand asset sales could signal increased credit risk resulting from distress or on the other hand they could improve internal liquidity and hence credit quality. Therefore the impact potential asset sales can have on credit quality is an empirical question and one that has previously not been examined in the literature. The paper aims to discuss these issues.

Using credit ratings as a measure of firm credit quality, in ordered probit regressions, this study finds evidence consistent with the internal liquidity view of the asset sales-credit risk relationship.

Results from ordered probit regressions of credit ratings show that the likelihood of higher credit ratings is increasing in industry-level turnover of real assets

Credit-rating agencies often cite the impact of asset sales on firm credit quality as a motivation for their rating assignments. Distress-driven asset sales could reduce firm credit quality whereas other asset sales could result in increased internal firm liquidity and hence improve firm credit quality. This bi-directional expectation leaves the question of how asset sales affect credit quality to be answered empirically and has not been previously tested in the literature.

We examine the empirical relationship between direct equity agency costs measures and corporate governance control mechanisms to control equity agency costs. We measure the three direct agency cost proxies commonly used in the literature: the operating expense; asset turnover; and selling, general, and administrative (SGA) ratios. Internal corporate governance control mechanisms examined are inside ownership (IO), outside ownership concentration (OC), the size of the board of directors (BODs), and the composition of the BODs (proportion of nonexecutive (NE) directors and separation of chief executive officer (CEO) and board chair). The external corporate governance control mechanism examined is the size of bank debt (short-term debt). Univariate and multivariate tests reveal that the only statistically significant relationship between corporate governance control mechanisms and direct equity agency cost measures is the negative relationship between the proportion of IO and direct agency costs. The asset utilization ratio (asset turnover) ratio is the best proxy for direct equity agency costs and can be useful for event studies of announcement period excess returns.

Sees the objective of teaching financial management to be to help managers and potential managers to make sensible investment and financing decisions. Acknowledges that financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, financial statement planning and ratio analysis. Seeks to combine the practical rules of thumb of the traditionalists with the ideas of the financial theorists to form a balanced approach to practical financial management for MBA students, financial managers and undergraduates.

This paper aims to appraise a decade (2004-2013) of annual financial statements of 58 locally owned construction firms’ (LOCOFs’) financial statements on turnover, fixed assets, gross profit and after-tax profit to assess their financial performance in the Nigerian construction industry. It serves as a check on firms’ financial performance, analysis and benchmarking of LOCOFs’ financial statement values to assess firms’ financial health and psychosocial environment.

A purposively sampled frame of 580 LOCOFs’ financial values (turnover, fixed asset and gross profit) from 212 turnover, 207 fixed assets, 184 gross profit and 217 after-tax profit data points was obtained. Firms’ capacities were obtained by categorisation, industrial average median was obtained and a regression analysis was used to describe the relationship and test of significance of the variables. A review of the possible effect of the research findings on LOCOFs’ psychosocial environment was undertaken.

Most LOCOFs were categorised as micro scale construction contracting business enterprises. LOCOFs’ financial performance was less than the performance of similar construction firm types and profits were not necessarily influenced by the cost of its investments on fixed asset but rather on firms’ turnover.

A limitation of this study is the paucity of financial data because of poor information access and storage.

The paper recommends more funding of infrastructural developmental projects and better patronage of LOCOFs which will positively influence firms’ turnover, profit and the psychosocial well-being of organisation and personnel.

This paper fulfils an identified need to periodically assess LOCOFs’ financial values so as to appraise financial performance and its possible effect on firms’ psychosocial environment.

Determining the relevant information using financial measures is of great interest for various stakeholders to analyze the performance of the firm. This paper aims at identifying these financial measures (ratios) which critically affect the firm performance. The authors specifically focus on discovering the most prominent ratios using a two-step process. First, the authors use an exploratory factor analysis to identify the underlying dimensions of these ratios, followed by predictive modeling techniques to identify the potential relationship between measures and performance.

The study uses data of 25 financial variables for a sample of 1923 Indian manufacturing firms which exist continuously between 2011 and 2018. For prediction models, four popular decision tree algorithms [Chi-squared automatic interaction detector (CHAID), classification and regression trees (C&RT), C5.0 and quick, unbiased, efficient statistical tree (QUEST)] were investigated, and the information fusion-based sensitivity analyses were performed to identify the relative importance of these input measures.

Results show that C5.0 and CHAID algorithms produced the best predictive results. The fusion sensitivity results find that net profit margin and total assets turnover rate are the most critical factors determining the firm performance in an Indian manufacturing context. These findings may enable managers in their decision-making process and also have vital implications for investors in assessing the performance of the firm.

To the best of the authors’ knowledge, the current paper is the first to address the application of decision tree algorithms to predict the performance of manufacturing firms in an emerging economy such as India, with the latest data. This practical perspective helps the organizations in managing the critical parameters for the firm’s growth.

The article highlights potential mismeasurement in working capital allocations among academicians and practitioners and revisits the relationship between firms' working capital and productivity, as evident from their values.

The research design acknowledges the relative role of firms' working capital vis-a-vis other assets in generating revenue, thereby effectively accounting for the overall asset efficiency in influencing firm value. The authors use a multivariate framework to draw inferences from the marginal impact of working capital and its components on firm value while controlling for asset utilization.

The authors find that, after accounting for asset utilization, the marginal impact of working capital and its components on firm value is quite weak. The results are consistent with the hypothesis that firms' trade-off between short-term and long-term assets per se should not have any value implications. After controlling for their asset turnovers, the authors find that higher allocations to working capital relative to other assets are not necessarily value-destructive. The findings contrast with the past literature.

The article, through its analytical and empirical insights, suggests that working capital allocations should be measured by managers and academicians relative to firms' other asset rather than their sales. Firm values should, therefore, be compared based on firms' overall asset utilization rather than inter-temporal allocations to short-term versus long-term assets.

Contrary to the existing literature so far, the article explicitly acknowledges the relative role of firms' other assets, and hence the overall asset utilization, to infer the marginal impact of working capital on firm value.

The purpose of this paper is to provide evidence of the effect of the differences related to reporting inventory, property plant and equipment, intangible assets, and development costs between International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) companies.

Both univariate tests (t‐tests) and multivariate tests (ANOVA, probit and logit analyses) are used to compare the ratios between IFRS and US GAAP companies.

Results consistently show that IFRS‐country firms have a significantly higher current ratio, a significantly lower asset turnover ratio, and a significantly lower debt‐to‐asset ratio.

This paper only focuses on inventory, property plant and equipment, intangible assets, and development costs. Other financial variables are not considered.

The results are useful for individuals who are interested in reporting and investing in countries using different financial reporting systems.

This paper is a timely examination of the recent emphasis of mandating IFRS.