Comparing relationships: between Capital Productivity and Return with between Earning per Share and Price-Earning Ratio and Return in Tehran Stock Exchange Market

Authors

1 Assistant Professor of Accounting, Islamic Azad University, Central Tehran Branch, Tehran, Iran.

2 Ph.D. Student in Accounting, Tehran University, Tehran, Iran.

3 M.A. of Accounting, Islamic Azad University, Central Tehran Branch, Tehran, Iran.

Abstract

"Return acquisition" is the main objective of investment. Investors need suitable criterions to recognize the return on their investment. There are many efforts take in introducing these suitable criterions. Profit and its derivatives are some of the suitable criterions used to predicate capital return. This paper introduces "capital productivity" as a new criterion where Capital productivity is defined as the added value divided by invested assets. Invested assets may be circulating capital, long-term operative assets, or total assets. Therefore, there are three different models to measuring capital productivity. In this paper, our attempt is to expose the higher informative content of capital productivity relative to profit and its derivatives. To do this, we compared profit (earning per share and price-earning ratio) and return relationship with capital productivity (all models) and return relationship. Also we compared relationships between different models of measurement and return. Results show that there are significant relationships between all models of capital productivity and return. The correlation between capital productivity -if total asset is used as the denominator- and return is more than earning per share and P/E. however there is no significant deference between correlations of different measuring models of capital productivity with return.

Keywords

References

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History

  • Receive Date: 01 June 2008
  • Revise Date: 04 December 2008
  • Accept Date: 20 February 2009

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