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Deflating Profitability in Finance Analysis by toubon.s is a document available to read on EtoBox.
This study evaluates the predictive power of gross profitability and net income in relation to average returns, finding that gross profit, when deflated by book value of total assets, shows strong predictive ability. However, when consistently deflated, net income matches this predictive power, suggesting that the choice of deflator significantly impacts the results. The authors propose an alternative measure, operating profitability, which better aligns current expenses with revenues and demonstrates a str
- Author
- toubon.s
- Language
- EN