In recent years there has arisen a new challenge to accountants' determination of profits, and this has come from a more sophisticated group-that of the investment analysts. Prominent in many company analyses emanating from brokerage houses and investment advisory firms has been the term "cash flow." If a common stock is analyzed in terms of cash flow, it can be made to look absurdly cheap in terms of market price to cash flow ratio; when examined in terms of profits reached by accepted accounting standards, the stock may represent no more than average value. The term "cash flow earnings" is a misnomer. Because of variations in accounting practices, the consensus among security analysts is that reported earnings do not in every case provide a true picture of operations. In seeking a lamp of Diogenes to illumine the truth, security analysts have been forced to develop their own concepts of "correct" earnings. Thus has been born the term, "cash flow earnings." As yet, security analysts themselves have developed no hard and fast definition of "cash flow" earnings.

Reviews the book "Audit Practice Case," 4th ed., by Harvey G. Meyer.

The author discusses management and industrial accounting in Western Europe and the differences between European and American businessmen. He discusses the social backgrounds of both businesses mentioning that the United States impress Europeans with its superior organization of industry. He highlights the fact that the American wage rates are higher than any of the European countries by comparing wage rates and systems of taxation. He evaluates the performance of European managers, while considering the lack of adequate incentive in delegating authority or creating a middle level management to make decisions. While discussing the shortcomings of the European industry in relation to industrial accounting, he points out that the engineer tends to be the man running the European industry, and in the function of forecasting and budget planning the engineer tends to think first of production and next of selling that production. He discusses the role of budget planning and standard cost accounting in Europe and the status of business schools as affecting European industry.

Between the end of World War II and the outbreak of the Korean police action, the subject of tax reform engaged considerable attention from the U.S. Congress. Since 1945, certain inequities in the law have been removed; a few loopholes have been closed while others have been enlarged. Meanwhile, the income tax monster has grown apace. Under the new administration, a serious study of tax revisions, already labelled as the "free enterprise" tax system, is being made. The changes that may eventuate under this system are presumed to be some mitigation of the double tax on dividends, shortening of the holding period for long term capital gains, easing of the tax impacts on new enterprises, a more liberal approach to allowable depredation and similar changes designed to encourage risk taking. The time for enactment of emergency tax legislation would be simultaneous with Congressional recognition that an emergency existed. A tax reduction might mean the continuance of budget deficits in times of burgeoning prosperity. With huge expenditures predictable for years in advance, the taxpaying public should be given assurances as to where it stands. Tax bills should be kept fair and equitable as the national need and income dictates.