Journal Article Hicks on Perfect Substitutes Get access Edwin B. Wilson Edwin B. Wilson Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 59, Issue 1, November 1944, Pages 134–140, https://doi.org/10.2307/1883261 Published: 01 November 1944

Journal Article On Notation for Utility Theory Get access Edwin B. Wilson Edwin B. Wilson Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 58, Issue 4, August 1944, Pages 647–650, https://doi.org/10.2307/1884749 Published: 01 August 1944

Anyone who contemplates employing others in business must look ahead and estimate the probability that in the long run he can recover from sales income all he will spend for salaries and wages, materials and supplies, and other charges and expenses of the business, that he can keep his capital intact or be able to compensate for losses, and have a net profit remaining, after taxes, sufficient to warrant the capital employed, risks involved, and abilities and efforts expended. Unless he can see a reasonable prospect of doing these things, there is no inducement for him to give employment. He certainly cannot ask others to contribute finances unless there is a prospect for reasonable returns on the capital employed. If he uses his own money on any other basis, he will probably not long be in a position to give employment. The net yield is to be measured by what remains to the investor after taxes. Whether the investment is in a corporation or a partnership or an individually-owned enterprise, the net result is the figure after all tax payments, corporation or individual.

A capacity for a professional career in accounting has a relation to technical aptitude which is comparable to the relation of the genius of an artist to his skill with the brush or the chisel. The skill is essential, but it won't carry him far in a professional career. According to the dictionary a profession is a calling in which one professes to have acquired some special knowledge that is used either by way of instructing, guiding, or advising others or of serving them in some art. This is all right so far as it goes, but the essential thing about a profession is that the layman is not capable of judging services rendered, because the special knowledge or skill of the professional man is beyond the power of the layman to evaluate. One can weigh the coal, or measure the lumber, or test the motor, but one cannot tell, unless one is a doctor, whether tonsils were well or poorly removed, or, unless one is a lawyer, whether or not the legal advice received is sound. Therefore the professional man may mislead or betray those who rely on him. The only protection they can have is in such standards of competence and integrity as are maintained by or on behalf of the profession.

The article presents information on merchandise turnover and the method of computing it. Data and statements are of limited usefulness unless they are properly interpreted. To assist and facilitate interpretation, particularly of the balance sheet and income statement, various ratio and percentage analyses frequently are made a part of, or appended to, these reports. One of the most significant of these ratios to merchandising businesses is the one that shows the average number of times the inventory was replaced during a given period. It is usually called merchandise turnover or stock-turn. The customary method of computing inventory turnover is to divide the total cost of goods sold by the average value of goods on hand during the period. It is recognized that the turnover figure obtained by the use of the suggested procedure is subject to the same weakness as that secured by the conventional method, in that it will be distorted somewhat if the period under review has been one that included sizable price changes.

The article presents information on statistical uses of accounting data. The distinction between bookkeeping and accounting is a significant one. Bookkeeping can be defined as the procedure used in recording business transactions. Accounting is the organization and analysis of the records. From the statistical point of view this division of labor can be compared first with the posting and computations of statistical data, and second with the collection and interpretation thereof. Many other valid parallels can be drawn between accounting and statistics. Both deal with figures, both require analytical skill, both apply to their data highly specialized techniques. Accounting demands that debit and credit entries balance to the last cent. Statistics is content with nearest thousands or even million depending upon the size of the figures, because the statistician's work is largely estimating for the purpose of formulating policies and action. The accountant, trained to exactitude, may not understand the statistician's tendency toward approximations.