Economic Analysis of Financial Ratios

Instructor

Professor Stefan Reichelstein

(Stanford University)

 

Vienna, June 19-21, 2014

 

Financial Ratios are widely used in connection with managerial performance measurement, firm valuation, regulation, and antitrust initiatives. While financial ratios are affected by the accounting rules in place, they also do reflect economic fundamentals. Disentangling the effects of accounting induced biases from economic fundamentals is the main objective of this course. 

Main topics to be covered include:

  • The Return-on-Investment metric for performance evaluation and price regulation;
  • The predictive power of the Market-to-Book ratio versus Tobin¬īs q;
  • Determinants of the Price-to-Earnings Ratio; and
  • The Accounting-Profit margin as an index of monopoly power.

The primary objective of the course is to introduce young researchers in accounting to current research paradigms related to accounting-based financial ratios and to identify promising avenues for future research.