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The Use Of Financial Data To Monitor Competing Models Of Firm Growth, Mohamed Rashwan, Tarek Ibrahim Eldomiaty
The Use Of Financial Data To Monitor Competing Models Of Firm Growth, Mohamed Rashwan, Tarek Ibrahim Eldomiaty
Business Administration
This paper examines three possible explanations for firm growth:
1 a firm grows according to the growth of sales revenues
2 a firm grows according to cost savings
3 a firms grows according to the two factors simultaneously
This paper introduces a new measure for firm growth based on sales-weighted growth of fixed assets. The estimation method uses the properties of the discriminant analysis to build three Z-score models, each of which discriminates low-growth firms from high-growth firms based on:
a sales ratios
b cost ratios
c sales and cost ratios together
The results show that the three discriminant models …