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CHARLES W. MULFORD and EUGENE E. CoMisKEY, Financial Warnings (New York, NY: John Wiley & Sons, Inc., 1996, pp. xvii, 478).
As its title suggests, this book develops an early warning system for negative earnings surprises. Although the focus of the analysis is on predicting bad news, the methods suggested are more generally applicable and the book can be useful to both equity investors and lenders.
"Warning signals" are developed from two sources. The first is an analysis of earnings reports that deviate substantially from expectations. This perspective is primarily quantitative. The second is a rather extensive survey of a large number of bank lenders, who propose both quantitative and qualitative indicators of financial prospects.
The presentation is particularly well organized into 13 chapters. Chapters 1 and 2 provide background and discuss the selection of the sample of earnings surprises. Chapter 3 offers a conceptual basis for identifying and classifying...