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On the use of Information Theory Concepts in the Analysis of Financial Statements

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  • Henri Theil

    (The University of Chicago)

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    Abstract

    Balance sheets and income statements are numerical decompositions of certain total sums: total assets, total liabilities, total sales, and total costs and expenses. The behavior of individual items measured as fractions of the corresponding total is important for the analysis of the company's financial position. It will be argued in this article that certain concepts derived from information theory are useful as summarizing descriptive devices for changes in such fractions as well as for the analysis of differences between companies of the same industry.

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    File URL: http://dx.doi.org/10.1287/mnsc.15.9.459
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 15 (1969)
    Issue (Month): 9 (May)
    Pages: 459-480

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    Handle: RePEc:inm:ormnsc:v:15:y:1969:i:9:p:459-480

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    Cited by:
    1. Smimou, K. & Bector, C.R. & Jacoby, G., 2007. "A subjective assessment of approximate probabilities with a portfolio application," Research in International Business and Finance, Elsevier, vol. 21(2), pages 134-160, June.
    2. Raghbendra Jha & Ibotombi S. Longjam, 2003. "A Divisia Type Saving Aggregate for India," ASARC Working Papers 2003-06, The Australian National University, Australia South Asia Research Centre.
    3. E. M. S. Ribeiro & G. A. Prataviera, 2014. "Information theoretic approach for accounting classification," Papers 1401.2954, arXiv.org, revised Sep 2014.
    4. Jobst, Andreas A., 2013. "Multivariate dependence of implied volatilities from equity options as measure of systemic risk," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 112-129.

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