Accrual models are very useful in accounting and finance. They allow the tracking of earnings (Hirshleifer et al. 2004; Roychowdhury 2006; Ronen and Yaari 2008) and are also used to forecast stock market returns (e.g., Fama and French 2007). However, these models tend to be ad hoc ones in which accruals are related to their economic determinants, like property, plant, and equipment (PP&E) and sales (Jones 1991). More recently, cash-flows were added to these models as a forecasting variable for earnings (DeChow 1994), but this method Atl Econ J (2013) 41:193–195 DOI 10.1007/s11293-012-9362-y