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QUANTITATIVE NON‐FINANCIAL INFORMATION AND INCOME MEASURES: THE CASE OF LONG TERM CONTRACTS
Author(s) -
Rees William,
Sutcliffe Charles
Publication year - 1994
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.1468-5957.1994.tb00323.x
Subject(s) - proxy (statistics) , accounting information system , economics , term (time) , econometrics , actuarial science , finance , cash , accounting , business , computer science , physics , quantum mechanics , machine learning
Much available numerical information is non‐financial. This information has the advantages of quantifying events that cannot be expressed in financial terms, timeliness and the avoidance of accounting procedures. This paper investigates the usefulness of quantitative non‐financial information (QNFI) as a proxy for current and future economic and accounting income. The study analyses a hypothetical firm which undertakes long term contracts. A mathematical model is constructed of the cash generation process of the company. QNFI measures are found to dominate accounting measures with regard to estimating economic income and predicting both economic and accounting income. These results are confirmed by a stochastic simulation model which allows for a more complex model.