This study examines the incremental information content of funds statement ratios. The funds statement ratios are presumed to have incremental information content when the association with security returns is stronger than when only balance sheet and income statement ratios are used.
The empirical results indicate that funds statement ratios possess incremental information content. Moreover, funds statement ratios seem to be more highly correlated with security returns than traditional ratios that are based on the balance sheet and income statement. These results are robust to various specifications of the variables.
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