Open AccessImproving the usefulness of accounting data in financial analysis
Author(s) -
Adrian Saville
Publication year - 2004
Publication title -
suid-afrikaanse tydskrif vir ekonomiese en bestuurswetenskappe/south african journal of economic and management sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.277
H-Index - 17
eISSN - 2222-3436
pISSN - 1015-8812
DOI - 10.4102/sajems.v7i3.1361
Subject(s) - accounting , accounting information system , accounting management , accounting standard , financial accounting , economics , management accounting , financial ratio , business , investment (military) , positive accounting , constraints accounting , actuarial science , political science , politics , law
Accounting practices are flawed. As a consequence, the accounting data generated by firms are generally open to interpretation, often misleading and sometimes patently false. Yet, financial analysts place tremendous confidence in accounting data when appraising investments and investment strategies. The implications of financial analysis based on questionable information are numerous, and range from inexact analysis to acute investment error. To rectify this situation, this paper identifies a set of simple, yet highly effective corrective measures, which have the capacity to move accounting practice into a realm wherein accounting starts to 'count what counts'. The net result would be delivery of accounting data that more accurately reflect firms' economic realities and, as such, are more useful in the task of financial analysis