Profit Model
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Profit Model
The profit model is the linear, deterministic algebraic model used implicitly by most cost accounting, cost accountants. Starting with, profit equals sales minus costs, it provides a structure for modeling cost elements such as materials, losses, multi-products, learning, depreciation etc. It provides a mutable conceptual base for spreadsheet modelers. This enables them to run deterministic simulations or 'What-if analysis, what if' modelling to see the impact of price, cost or quantity changes on profitability. Basic model : \pi = pq - (F_n+wq) \, where: : is profit : ''p'' is sales price : ''F''''n'' is fixed costs : ''w'' is variable costs per unit sold : ''q'' is quantity sold For an expansion of the model see below. Background The justification for wanting to express profit as an algebraic model is given by Richard Mattessich, Mattessich in 1961: :'To some operations analysts the mere translation of accounting models into mathematical :terminology, without a calculus ...
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Cost Accounting
Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs." (IMA) Often considered a subset of managerial accounting, its end goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future. Cost accounting information is also commonly used in financial accounting, but its primary function is for use by managers to facilitate their decision-making. Origins of Cost Accounting All types of businesses, whether manufacturing, trading or producing services, require cost accounting to track their activities. Cost accounting h ...
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What-if Analysis
Sensitivity analysis is the study of how the uncertainty in the output of a mathematical model or system (numerical or otherwise) can be divided and allocated to different sources of uncertainty in its inputs. A related practice is uncertainty analysis, which has a greater focus on uncertainty quantification and propagation of uncertainty; ideally, uncertainty and sensitivity analysis should be run in tandem. The process of recalculating outcomes under alternative assumptions to determine the impact of a variable under sensitivity analysis can be useful for a range of purposes, including: * Testing the robustness of the results of a model or system in the presence of uncertainty. * Increased understanding of the relationships between input and output variables in a system or model. * Uncertainty reduction, through the identification of model input that cause significant uncertainty in the output and should therefore be the focus of attention in order to increase robustness (perhaps ...
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Algebra
Algebra () is one of the broad areas of mathematics. Roughly speaking, algebra is the study of mathematical symbols and the rules for manipulating these symbols in formulas; it is a unifying thread of almost all of mathematics. Elementary algebra deals with the manipulation of variables (commonly represented by Roman letters) as if they were numbers and is therefore essential in all applications of mathematics. Abstract algebra is the name given, mostly in education, to the study of algebraic structures such as groups, rings, and fields (the term is no more in common use outside educational context). Linear algebra, which deals with linear equations and linear mappings, is used for modern presentations of geometry, and has many practical applications (in weather forecasting, for example). There are many areas of mathematics that belong to algebra, some having "algebra" in their name, such as commutative algebra, and some not, such as Galois theory. The word ''algebra'' is ...
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Richard Mattessich
Richard Victor Alvarus Mattessich (August 9, 1922 – September 30, 2019) was an Austrian-Canadian business economist and Emeritus Professor of Accounting at the University of British Columbia, known for introducing the concept of electronic spreadsheets into the field of business accounting in 1961, as well as pioneering analytical and philosophical methods in accounting. Life and work Born in Trieste, Mattessich obtained his degree in Mechanical Engineering in 1940 at the Engineering College, Vienna IV, his MBA in 1944 at the Vienna School of Economics and Business Administration, where in 1945 he also obtained his Dr. rer. pol. in Economics. After his graduation Mattessich in 1945 started as research associate at the Austrian Institute of Economic Research in Vienna. In 1947 he moved to the Rosenberg Institute of St. Gallen, where he was appointed Instructor of Commerce. In 1952 he moved to Canada and was Department Head of Commerce from 1953 to 1959 at the Mount Allison ...
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Newton's Method
In numerical analysis, Newton's method, also known as the Newton–Raphson method, named after Isaac Newton and Joseph Raphson, is a root-finding algorithm which produces successively better approximations to the roots (or zeroes) of a real-valued function. The most basic version starts with a single-variable function defined for a real variable , the function's derivative , and an initial guess for a root of . If the function satisfies sufficient assumptions and the initial guess is close, then :x_ = x_0 - \frac is a better approximation of the root than . Geometrically, is the intersection of the -axis and the tangent of the graph of at : that is, the improved guess is the unique root of the linear approximation at the initial point. The process is repeated as :x_ = x_n - \frac until a sufficiently precise value is reached. This algorithm is first in the class of Householder's methods, succeeded by Halley's method. The method can also be extended to complex functions an ...
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Budgets
A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmental impacts such as greenhouse gas emissions, other impacts, assets, liabilities and cash flows. Companies, governments, families, and other organizations use budgets to express strategic plans of activities in measurable terms. A budget expresses intended expenditures along with proposals for how to meet them with resources. A budget may express a surplus, providing resources for use at a future time, or a deficit in which expenditures exceed income or other resources. Government The budget of a government is a summary or plan of the anticipated resources (often but not always from taxes) and expenditures of that government. There are three types of government budget: the operating or current budget, the capital or investment budget, a ...
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Cost Accounting
Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs." (IMA) Often considered a subset of managerial accounting, its end goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future. Cost accounting information is also commonly used in financial accounting, but its primary function is for use by managers to facilitate their decision-making. Origins of Cost Accounting All types of businesses, whether manufacturing, trading or producing services, require cost accounting to track their activities. Cost accounting h ...
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Financial Modeling
Financial modeling is the task of building an abstract representation (a model) of a real world financial situation. This is a mathematical model designed to represent (a simplified version of) the performance of a financial asset or portfolio of a business, project, or any other investment. Typically, then, financial modeling is understood to mean an exercise in either asset pricing or corporate finance, of a quantitative nature. It is about translating a set of hypotheses about the behavior of markets or agents into numerical predictions. At the same time, "financial modeling" is a general term that means different things to different users; the reference usually relates either to accounting and corporate finance applications or to quantitative finance applications. While there has been some debate in the industry as to the nature of financial modeling—whether it is a tradecraft, such as welding, or a science—the task of financial modeling has been gaining acceptance and ...
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Income Statement
An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''statement of financial performance'', ''earnings statement'', ''statement of earnings'', ''operating statement'', or ''statement of operations'') is one of the financial statements of a company and shows the company's revenues and expenses during a particular period. It indicates how the revenues (also known as the ''“top line”'') are transformed into the net income or net profit (the result after all revenues and expenses have been accounted for). The purpose of the income statement is to show managers and investors whether the company made money (profit) or lost money (loss) during the period being reported. An income statement represents a period of time (as does the cash flow statement). This contrasts with the balance sheet, which repre ...
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Management Accounting
In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Definition One simple definition of management accounting is the provision of financial and non-financial decision-making information to managers. In other words, management accounting helps the directors inside an organization to make decisions. This can also be known as Cost Accounting. This is the way toward distinguishing, examining, deciphering and imparting data to supervisors to help accomplish business goals. The information gathered includes all fields of accounting that educates the administration regarding business tasks identifying with the financial expenses and decisions made by the organization. Accountants use plans to measure the overall strategy of operations within the organization. According to the Institute of Management Accountants (IMA), "Management accounting is a profession t ...
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Outline Of Finance
The following outline is provided as an overview of and topical guide to finance: Finance – addresses the ways in which individuals and organizations raise and allocate monetary resources over time, taking into account the risks entailed in their projects. Overview The term finance may incorporate any of the following: * The study of money and other assets * The management and control of those assets * Profiling and managing project risks Fundamental financial concepts * Finance ** Arbitrage ** Capital (economics) ** Capital asset pricing model ** Cash flow ** Cash flow matching ** Debt *** Default *** Consumer debt *** Debt consolidation *** Debt settlement *** Credit counseling *** Bankruptcy *** Debt diet *** Debt-snowball method *** Debt of developing countries **Asset types *** Real Estate *** Securities *** Commodities *** Futures *** Cash ** Discounted cash flow ** Financial capital *** Funding ** Entrepreneur *** Entrepreneurship ** Fixed income analysis * ...
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Profit
Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory interest in land * Account of profits, a type of equitable remedy in law (also known as an accounting) Arts, entertainment, and media * ''Profit'' (magazine), a Canadian business magazine aimed at entrepreneurs * ''Profit'' (TV series), an American TV series starring Adrian Pasdar People * Joe Profit (born 1959), former American football player * Laron Profit (born 1977), professional basketball player * Richard Profit (born 1974), English mountaineer and adventurer * Park "Profit" Joon-yeong, professional ''Overwatch'' player Places * Profit, United States Virgin Islands See also * Prophet (other) * The Profit (other) The Profit may refer to: * ''The Profit'' (film) * ''The Profit'' (TV series) See also * Profit (di ...
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