IT is an accepted fact that business cycles exercise a profound influence upon the finances of American cities. The purpose of this study is to compare the cyclical fluctuations of business and of municipal expenditures and thus to throw some additional light on the cycles in American business during the last century. Expenditure data extending over a long period, roughly one hundred years, exist for three cities. These cities are Boston, Massachusetts; Providence, Rhode Island; and Rochester, New York. For other cities, expenditure figures are fragmentary or in a form not suitable for analysis. The data for the three cities mentioned were carefully collected by writers of their financial histories, were supplemented for this century from the Census Bureau's Financial Statistics of Cities,and are probably as accurate as such figures can be made.' They include all items which go to make up the category government cost payments; namely, maintenance, interest, and outlays. It was impossible to eliminate capital outlays, and their presence doubtless clouds the picture somewhat. All expenditures were placed upon a per capita basis to take account of the influences of changes in population either through natural growth or the annexation of new territory. In the absence of complete knowledge as to the dates of fiscal years, it has been assumed that all figures are for calendar years. The faultiness of municipal accounting must also be recognized as rendering the data inherently inaccurate. Such errors are probably small compared to the size and changes in the annual items dealt with, and are not serious for the purposes of this discussion.

The article illustrates the use of the term heuristics and thereby facilitate retention, and to provide an appreciation as to the limitations as well as the advantages of this approach to problem solving. Students of management and accountants concerned with computer technology and its application to the problems of business administration have probably seen the terms "heuristic" and "heuristics" in the literature used as an adjective and a noun. A heuristic model, written as a computer program, simulates the procedures used in choosing investment policies for accounts, in evaluating the alternatives presented by the market, and in selecting the required portfolios. Heuristics are important as they often lead quickly to solutions that one would otherwise reach much more expensively by analytic techniques.

Capital structure, Tax incentives, Dividends, Dividend reinvestment plan

In 1976, the U. S. Senate Subcommittee on Reports, Accounting, and Management (Metcalf Committee) provided data indicating that the eight largest auditing firms in the country (the Eight) are overwhelmingly the major suppliers of audit services to the largest corporations in the United States. The Subcommittee concluded from these data that monopolistic practices by the Big Eight have led to a two-tier structure in the audit industry-one tier consisting of the eight largest auditors and the second tier consisting of all other auditors, with the Big Eight dominating the industry. In the light of these findings, the committee suggested that more activist regulation of the audit industry was needed by the Securities and Exchange Commission. Dopuch and Simunic [1980] examined a wide variety of evidence that might tend to support or refute allegations of a lack of competition in the auditing profession. They (D-S) concluded that the industry was competitive, and in a subsequent paper [1982] they argued that many of the apparent monopolistic characteristics of the industry could be explained by a product-differentiation hypothesis. More specifically, they hypothesized that different auditing firms provide auditing services which are perceived by investors to be different in quality, and in particular, that the Big Eight auditors are perceived as being more credible than non-Big Eight auditors. If this is the case, the Big Eight firms would be

In addition to the recent interest of the Securities and Exchange Commission, executive forecasts of earnings have received a considerable amount of attention in the academic literature (Basi, Carey, and Twark [1976], Lorek, McDonald, and Patz [1976], McDonald [1973], Copeland and Marioni [1972], Kapnick [1972], Daily [1971]). Much of this attention has focused either on the absolute or relative accuracy of such forecasts or on the ethical, legal, and practical problems of publishing and reviewing executive forecasts of earnings in external accounting reports. One aspect that has not been adequately considered is investor reaction to executive long-range forecasts of earnings. The purpose of this study is to investigate the information content of voluntarily disclosed long-range earnings forecasts by executives by determining security return reactions to a sample of such forecasts that were reported in the Wall Street Journal. The inclusion of management estimates of future earnings in annual reports is advocated on the assumption that such forecasts contain information, of interest to investors or other persons outside the firm, not otherwise publicly available. Not only do executives have information about internal and external factors expected to affect future operations and earnings, but they also exert considerable effort evaluating these factors and their impact on prospective operations in the normal planning function. Consequently, executive forecasts of earnings might be of inter-

Replacement cost, Rule 3-17, Inventories, Estimators of replacement costs

This paper studies the relationship between real interest rates and housing using a microeconomic approach. The primary impact of interest rates is on the demand side. The partial equilibrium, comparative static model of demand behavior presented is based on intertemporal preference maximization subject to a multiperiod income constraint. The model is always in terms of real prices and interest rates and operates in discrete time. Consumer preferences are represente by a smooth utility function which depends on two kinds of goods, housing and other nondurables. This study is couched in a neoclassical framework with all markets assumed perfect unless otherwise specified. With this approach the theory of housing and interest rates becomes part of standard consumer theory, rather than being based on inappropriate present value considerations.

Although the importance of evaluating the risk of potential investments has long been recognized, only recently have formulations been developed to include risk as an explicit variable in the decision-making process. The considerable progress being made in this area, both in theory and in application, is attested to by the number and variety of contributions to the literature.