PREDICTING EARNINGSUSING COST ACCOUNTS RATIOS: EVIDENCE FROM MANUFACTURING LISTED FIRMS

In the research fields of earnings forecast and the behavior of cost accounts there aremany studies that indicate factors that affect earnings and factors that are affected by the costaccounts.Earnings affected by many factors as investments, cash flows, ROI, cost of capital, size, and others.Also in the area of earnings management crucial factors that affect earnings are inventories,accounts receivable, accounts payable, depreciation expense, accrued liabilities and others.Resent research in cost accounting field addresses the stickiness of CGA cost as an important factorthat may be affect earnings or stock return in all industries except financial service industry. Thestickiness of cost has investigated mostly in SGA cost because the manufacturing cost, inventoryand cost of goods sold, change proportionately with activity levels that it means that are mostlyvariable factors.This empirical study investigates the impact of manufactory cost and SGA to operating income inmanufacturing industry, using data from 2.128 listed firms, separated in three sectors according tosales level.The findings show that manufacturing cost and SGA cost affects the operating income differently inthe three levels. This result disclosures the need for further investigation in separated industries, indifferent countries and finally to find a stable forecasting model using the cost accounts.