The role of accounting numbers in valuation has been of fundamental interest to analysts, investors and researchers alike. Much of the empirical research in accounting based valuation has revolved around analyzing historical and forecasted accounting numbers. Empirical applications of these models include studies examining the value relevance of historic accounting numbers.
The usefulness or relevance of net income has been repeatedly ascertained in empirical studies. It seems that accountants do not necessarily understand the common knowledge in academic circles correctly. This awareness is one of the motives of this paper to review the empirical evidence on relevance of net income.
This paper investigates to confirm the concept of net income by comparing it with similar concepts, which is closely related to net income.