Knowledge that Transforms

Abstract The article discusses some research work on the econometric analysis of goodwill. In, 1884 William Harris delivered a paper, "The Law and Practice in Relation to Goodwill," to the Manchester Accountants' Students' Society. This occasion marked what is probably the first discussion of the subject in accounting literature. The paper focused mainly on the valuation of goodwill for purposes other than income determination although it did mention the problem of amortizing goodwill. The purpose of this article is to attempt to estimate the range for some of these variables to reconcile theoretical valuations with market transactions in a specific class of purchase transactions. The article discusses the class of purchase transactions examined in this study and the data available from those transactions. Of all the various classes of enterprise, market goodwill valuations for liquor stores should be among the easiest to reconcile with theoretical valuations. These businesses are "simple," homogeneous and enjoy State-enforced monopoly and retail price maintenance.

Reviews the book "The Game of Budget Control," by G.H. Hofstede.

Reviews the book "Investment Risk & Uncertainty: A Practical Approach for Australian Companies," by P. Spry-Bailey.

Abstract Acquisitions by corporations of their own outstanding shares are one of those transactions which seem to be peculiarly subject to misunderstanding. From time to time efforts have been made to shed light on the nature of such transactions, but to date the gloom of confused thinking and questionable policy has not been fully dispelled in this special segment of corporate finance. About a half-century ago the author of this article published an article which he naively assumed would settle the basic issue, once and for all, and in other writings since this piece appeared he has tried his hand at the chore of promoting straight thinking on the subject of "treasury" shares. These comments represent a sort of postscript to the earlier attempts, and they are drafted with the thought that a continuing campaign is necessary to keep the leaven of logic alive wherever there is persistent susceptibility to error. The first step in grappling with the subject of "treasury" shares is to recognize that such shares have substantially the same status as stock that has never been issued. This essential point, unfortunately, has usually been overlooked in the textbooks and other writings on accounting and finance.

Abstract The issue "to round or not to round" a linear programming solution when fractional answers have no meaning has long been a subject of concern to management. Professor Alfred Rappaport has shown that rounding can provide better answers than indiscriminate use of integer programming, particularly in the uncertain marketing and cost environment faced by many managerial decision makers. This note presents the other side of the coin, showing that even under uncertainty rounding can be dangerous, and the whole number solutions provided by integer programming (intelligently applied) are generally to be preferred. A simple numerical example is given of a problem whose linear programming solution can be rounded in more than two thousand ways, none of them giving a feasible, let alone optimal, integer programming solution.

Abstract Oftentimes ordinary methods of programming will serve the needs of managerial analysis so that the special techniques of integer programming are unlikely to contribute much. The difficulties of performing systematic sensitivity analyses on integer models further limit the advantages of the model. Finally, when optimal solutions to the linear and integer programs are materially different, the adverse consequences of indiscriminately using integer programming solutions were illustrated.

Reviews the book "Foreign Trade Accounting and Management Handbook," by Jack Goldner.

Reviews the book "International Business Enterprise," by Endel J. Kolde.