Accounting term paper

[...]
“The presentation of financial statements by business enterprises is always regarded as an important event worthy of considerable attention and interest. Financial statements are required by the law, and are subject to the law. They represent the only source of financial information that is accessible to the many interested parties outside the enterprises concerned. The law states that the impression of an enterprise's financial situation conveyed by financial statements must be "true and fair," and undoubtedly regards the content of financial statements as being more important than the way they are presented. But the truth is that it is impossible to describe the financial position of a business enterprise using traditional financial statements. All attempts to do so are doomed to failure. The practical presentation of financial statements is based all over the world on seven apparently sound, so-called "basic principles." But these principles are in fact based on nothing more than traditional practice and custom. It would actually be more honest to describe traditional financial statements as "unfounded dogma," as a logically dubious tradition whose continued use results in the loss of great material and human resources every day of the year. As tools for describing the financial situation of a business enterprise, traditional financial statements are worthless, because it is impossible to describe something that is constantly changing using something that only changes once a year.”
[...]

[...]
“The separation principle and the value independence proposition have led to two approaches to evaluate the investment decisions of a firm within the net present value method. The first approach utilizes the prices of claims against the firm in order to establish the component cost of different financing sources, which are then used to calculate an average weighted cost of capital, in terms of
Ka = ? Wi Kj
where
Ka = average weighted cost of capital
Wi = specific component cost of financing such as debt or equity
Kj = weighting factor
The average weighted cost of capital is used as a measure of the average opportunity cost or financing cost to a specific firm. As long as investment projects are small and within a constant risk class, the expansion in scale of a firm can be evaluated within the NPV method.

The second approach assesses the risk-adjusted opportunity cost of an asset (investment project) directly by utilizing the concept of perfect substitutes and the Law of One Price. Since different financing arrangements do not alter the value of assets in perfect and complete markets, investment projects can be evaluated directly using the appropriate risk-adjusted opportunity cost and the NPV method.”
[...]

Accounting term paper

What does this service include?

What is NOT included?

Discounts