The Finnish Journal of Business Economics
Part I 2/1983, 135-174.
Part II 3/1983, 209-241.
Part III 1/1984, 23-48.
There is a considerable body of literature seeking to estimate the
long-run profitability of the firm by trying to establish a relation
between the internal rate of return (IRR) of the firm's capital
investments and the firm's accountant's rate of profit (ARP), also
called accountant's rate of profit (ARR), return on capital invested
(ROI) and book yield. Furthermore, Ruuhela (1972) and (1975)
presented in Finnish a model for measuring the long-run
profitability of the firm by estimating the IRR from published
financial statements directly. Salmi (1982) and Ruuhela, Salmi,
Luoma and Laakkonen (1982) presented improved derivations of
Ruuhela's model. The current, extensive three-part paper has two
main objectives. First, the intent is to make the detailed
instructions and the computer codes (in BASIC) for performing
Ruuhela's profitability, growth and financing analysis readily
available. Second, estimation results on publicly traded Finnish
metal industry firms are presented for the period from 1968 to 1981.
Keywords: financial statement analysis, profitability estimation, internal rate of return, metal industry