Revisit the Use of Asset Turnover and Profit Margin in Forecasting Operating Profitability: Further Evidence

18 Pages Posted: 3 May 2021

Date Written: April 24, 2021

Abstract

This paper extends the work of prior search in studying the incremental information captured by the DuPont components, changes in asset turnover (∆ATO) and changes in operating profit margin (∆PM), in forecasting the changes in return on net operating assets (∆RNOA) one year ahead. This study extends the research by utilizing updated data from COMPUSTAT firm database till the end of 2020. It first starts withe baseline model then advance further by incorporating the direction of the change in PM and possible firm’s earning management. Once again, the model confirms significant relationship between DuPont components of current RNOA and future change in RNOA.

Keywords: DuPont analysis, financial statement analysis, forecasting, profitability, return on assets

JEL Classification: G3

Suggested Citation

Nguyen, James, Revisit the Use of Asset Turnover and Profit Margin in Forecasting Operating Profitability: Further Evidence (April 24, 2021). Available at SSRN: https://ssrn.com/abstract=3833200 or http://dx.doi.org/10.2139/ssrn.3833200

James Nguyen (Contact Author)

Western University ( email )

London, Ontario
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
100
Abstract Views
307
rank
358,273
PlumX Metrics