An Approach to Pricing and Output Decisions When Prices Are Changing

Arnold, John

doi:10.1111/j.1468-5957.1977.tb00723.x

Cited by 2 publications

(2 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To illustrate the application of this result, consider the data of Table 1 and the income statements portrayed in Tables 2 and 3. Since the firm's demand function is the same over each of the intervals [0,1] and [1,2], the hypothesis of the above result is satisfied. Thus from Tables 3 and 4 it will be observed that the …”

Section: Theoremmentioning

confidence: 80%

“…Second, under the neoclassical economic framework adopted within this paper, all firms earn the same (maximal) return (over cost), so that the current operating profit ratio is also a lower bound for the ratio of realized income to the (historic) cost of goods s01d.I~ Indeed, the current operating profit ratio may be utilized to provide a lower bound for the 'absolute' value of the firm's realized income (of the succeeding productive interval) by simply multiplying the succeeding period's productive investment by the current period's current operating profit ratio. Thus, in the example illustrated in Tables 1 through 4, a lower bound for the firm's realized income over the period [1,2] is 0.0364 (Table 4) x 2939.39 (Table 3) or 106. 99.…”

Section: 34mentioning

confidence: 99%

See 1 more Smart Citation

The 'Agio' Concept of Interest and the a priori Foundations of Current Operating Profit

Tippett¹

1980

Abacus

View full text Add to dashboard Cite

Since the publication of Edwards and Bell's classic text [4], there has been a steady but unmitigated flow of critical comment, most of which questions the analytical validity, and/or empirical correspondence of the assertions and definitions contained within the book.' Perhaps the most vilified of all their claims relates to the predictive properties attributed to current operating profit; a claim which has been variously criticized on both the aforementioned grounds (see Prakash and Sunder [21], pp. 7-9).2 Far from adding to this volume, the present paper has as its objective the provision of an apriori foundation for the Edwards and Bell concept of current operating profit, using as a base the 'premium' or 'agio' concept of interest first formulated by the German economist Eugen Von Bbhm-Bawerk [2], and later refined and extended by the neoclassical American economist, Irving Fisher [5] [6] [7].3To this end, the paper is divided into four sections. Part one states, proves and illustrates several theorems of the Bohm-Bawerk-Fisher 'premium' concept of interest. These results were first derived in slightly different form by Fisher as early as 1907. Part two builds on these theorems by proving that under (quite general) conditions, the current operating profit of one 'productive interval' can in fact be used to bound the realized profit of the succeeding 'productive interval'. That is, as claimed by Edwards and Bell, current operating profit can be used for predictive purposes. Finally, part three tests the theory (developed in part two) against some available empirical evidence, whilst part four makes some summary comments on the productive capacity concept currently utilized by 'practising' accountants.' The latest of these is Prakash and Sunder [22]. The reference list at the end of this article contains most of the relevant literature. One recent study which tests the predictive capacity of current operating profit and which is not mentioned by Prakash and Sunder is Buckmaster, Copeland and Dascher 131. According to Fisher, there are two approaches which may be taken to interest theory. The first, which is characterized by the work of J. B. Clark, is called the 'price' concept of interest and assumes that production costs and their associated receipts occur simultaneously. The second, which following its author Eugen Von %hm-Bawerk, Fisher dubbed the 'premium' or 'agio' concept of interest. has it that productive outlays precede the receipts of their associated income (Fisher [S], p. 247). Usually the accounting and finance literature adopts Clark's 'price' concept (Revsine [23], pp. 95-104; Lee [IS], pp. 47-61; Arnold [I]; Revsine WI).

show abstract

Section: Theoremmentioning

confidence: 80%

Section: 34mentioning

confidence: 99%