The article focuses on funds flow. Recent accounting literature has produced two articles on mathematizing funds flow. One of the approaches undertaken shows algebraically that the net change in working capital is explained by the changes in non current assets and equities. This article attempts to analyze algebraically the individual changes in non current accounts and thereby provide a means to calculate directly through equations the individual sources and uses of working capital needed for a funds statement. In addition, an algebraic system for cash-flow analysis is also discussed. The algebraic approach provides a flexible means to adapt to different concepts of funds, such as net working capital, cash flow, and net quick assets. The algebraic expression of funds flow is consistent with the trend towards computerized accounting. The equations can be programmed readily and used to generate funds statements. This article uses a complete set of equations to tie together the funds flow from the income statement and balance sheet items, to show the elimination of non fund items, and to show the individual sources and uses of funds in the non current accounts.

The article attempts to clarify the distinction between monetary and non-monetary items by focusing on the monetary definitions used in the Accounting Research Study No. 6, which classifies prepayments or deferred charges as monetary items because they are advance payments on liabilities which will accrue as time passes or as services are rendered. Monetary assets represent cash and fixed-money claims that are, relatively speaking, uncommitted funds. The service potential derived from monetary assets pertains to funds that are potentially available to acquire real assets. In contrast to cash and fixed-money claims, nonmonetary or real assets are measured by a past commitment of funds. The distinction means that deferred charges and credits should be excluded from the calculation of the real gain or loss on the net monetary position. Instead, the deferred charges and credits are classified as real assets, and should be adjusted by the use of a general price-level index into current dollars. In this manner homogeneous revenues and expenses are matched in terms of equivalent dollars.

C-V-P Analysis, Cost-Value-Profit analysis, Upper boundaries

C-V-P Analysis, Uncertainty, Cost-volume-product Analysis, Volume changes

Recent changes in the tax laws have not generally been included in capital-budgeting models. Consequently, this article attempts to bring together the important tax considerations that should be included in capital investment decisions. The tax effects related to salvage values, investment credits, depreciation, additional first-year depreciation deductions, recapture provisions, trade-ins, and operating costs are analyzed and summarized algebraically in an equipment-replacement model. An appendix is included to portray the application of the tax considerations to an actual equipment-replacement problem.

Frank K. Reilly, Ralph E. Smith, Glenn L. Johnson, A Correction and Update Regarding Individual Common Stocks as Inflation Hedges, The Journal of Financial and Quantitative Analysis, Vol. 10, No. 5 (Dec., 1975), pp. 871-880

The results of this study indicate that the individual common stocks in the Dow-Jones. Industrial Average were not consistent inflation hedges. Assuming an 8.2 percent normal required rate of return, none of the common stocks was a complete inflation hedge during all three recent inflationary periods tested. Even assuming a zero normal required rate of return á la traditional investment theory, only six (20 percent) of the thirty common stocks sampled were inflation hedges during all three inflationary periods.