An accurate forecast of real return requires that accounting and debt adjustments
be made to reported earnings. This article presents methodologies that investors
can use to estimate the accounting and debt adjustments for individual companies
and offers evidence, derived from a predictive regression model, that investors
should consider these adjustments important. The article also reviews the use of
nonfinancial corporate debt and makes the case that investors should view the
use of debt by nonfinancial companies more positively than they currently
do.