The paper analyses the relationship between the book-yield on investment (measured as the conventional ratio of net book-income to net book-value of assets) and the true yield on investment. It examines the effect on this relationship of variations in capitalization policy, depreciation methods, revenue patterns and investment growth rates. It discusses the potential error in the conventional bookmeasure of rate of return for the oil and gas p:roducing industry and the implications of this error for managerial evaluation and F. P. C. regulation.
The paper analyses the relationship between the book-yield on investment (measured as the conventional ratio of net book-income to net book-value of assets) and the true yield on investment. It examines the effect on this relationship of variations in capitalization policy, depreciation methods, revenue patterns and investment growth rates. It discusses the potential error in the conventional bookmeasure of rate of return for the oil and gas p:roducing industry and the implications of this error for managerial evaluation and F. P. C. regulation.
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