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ESTIMATING THE INTERNAL RATE OF RETURN FROM PUBLISHED FINANCIAL STATEMENTS
Author(s) -
Salmi Timo
Publication year - 1982
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1982.tb00973.x
Subject(s) - internal rate of return , modified internal rate of return , rate of return , economics , financial ratio , profit (economics) , finance , working capital , econometrics , return on capital employed , business , actuarial science , return on investment , financial capital , microeconomics , investment performance , capital formation , production (economics)
This paper presents a new approach to estimating the longrun internal rate of return (IRR) for the firm from the accountant's rate of profit based on published financial statements. The model developed for estimating the IRR includes both capital and net working asset investments. Modelling and estimating the growth of the firm is an integral part of the approach. Furthermore, estimating the parameters describing the long‐run financing behavior of the firm is presented based on discounted average funds flow statements. Finally, the approach is applied on the financial data of a large Finnish business enterprise.