AN ANALYSIS OF THE USEFULNESS OF DISAGGREGATED ACCOUNTING DATA FOR FORECASTS OF CORPORATE PERFORMANCE*

The purpose of this paper is to derive the conditions under which disaggregated accounting data contribute to more accurate forecasts of corporate performance. A comparison formula is derived and applied to actual data. The results obtained indicate that disaggregated data do not necessarily produce better forecasts of corporate performance than do aggregated data. The paper concludes with implications of the results to some reporting issues.     

JOINT PRODUCT COST ALLOCATION IN THE CONTEXT OF COST-PLUS PRICING DETERMINATIONS WITH NON-UNIFORM MARKUPS

Companies that use cost-based pricing sometimes manufacture products that involve joint cost allocation. A problem with this is that, while product prices are a function of the full cost, joint cost allocation methods using net realizable values depend on the product prices. This paper demonstrates that when all costs and production quantities are known or can be budgeted, it is possible to simultaneously determine unique product prices (having non-uniform markup rates) and cost allocations using the net realizable value method.     

An Empirical Estimation of the Investor Loss Function Associated with the Use of Analysts' Forecasts of Earnings

The aggregate investor loss function associated with the use of analysts' forecasts of earnings expresses the relation between loss and prediction error. Prior research suggested that the shape of this loss function should provide guidance in decision rules for investors. This study empirically estimates the investor loss function and finds an asymmetry in the relation between loss and analysts' prediction error. For overestimates of earnings, loss is a quadratic function of error; while for underestimates of earnings, loss is a linear function of error.     

Development of a Prediction Model for Hospital Closure Using Financial Accounting Data*

Numerous research studies have examined the use of financial accounting data in the prediction of corporate bankruptcy. Partly due to a lack of available data, however, little work has been done in developing a closure prediction model specifically for hospitals. Using cost reports from the Health Care Financing Administration and a sample of 71 closed hospitals and a matched sample of 71 open hospitals, the current study examines the relationship between 21 financial accounting ratios and hospital closure. Univariate logit results indicate that hospital closure is significantly related to 17 of the 21 ratios one year prior to closure. Results are also presented using a multivariate model, and for the relationships two years prior to closure. The current study provides information helpful to users in identifying financial variables which may be important indicators of hospital closure.