ABSTRACT

This paper devises two graphical forms of cumulative financial statements using data from Chrysler Corporation over the period 1923–1975 as an example to display the nature of these reports. The first set of graphs shows the relationship between cumulative income and cumulative cash flows to suppliers of capital. The second set shows the relationship between annual accounting rates of return and a backward-moving cumulative average multi-period rate of return. Although Chrysler’s 53-year average rate of return to stockholders’ equity was 130, the time series of multi-period rates of return have shown a declining trend since the late 1930’s. These graphs reflect the firm’s activities as a cumulative process instead of a series of annual ventures. Consequently, they integrate annual reports within a longer time frame. The cumulative graph is an efficient and effective device for presenting a firm’s financial history, and, like other methods of data analysis, also stimulates analytical thinking.