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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 Management accounting, 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 activit ...
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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 robust decision, 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 rob ...
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Algebra
Algebra (from ar, الجبر, lit=reunion of broken parts, bonesetting, translit=al-jabr) is one of the broad areas of mathematics Mathematics (from Greek: ) includes the study of such topics as numbers (arithmetic and number theory), formulas and related structures (algebra), shapes and spaces in which they are contained (geometry), and quantities and their changes (cal ..., together with number theory Number theory (or arithmetic or higher arithmetic in older usage) is a branch of devoted primarily to the study of the s and . German mathematician (1777–1855) said, "Mathematics is the queen of the sciences—and number theory is the queen ..., geometry Geometry (from the grc, γεωμετρία; ' "earth", ' "measurement") is, with , one of the oldest branches of . It is concerned with properties of space that are related with distance, shape, size, and relative position of figures. A mat ... and analysis Analysis is the process of breaking a compl ...
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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 Vienna University of Technology, Engineering College, Vienna IV, his MBA in 1944 at the Vienna University of Economics and Business, 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 University of St. Gallen, Rosenberg Institute of St. Gallen, where he was appointed Instructor of Commerce. In ...
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Newton's Method
In numerical analysis Numerical analysis is the study of algorithms that use numerical approximation (as opposed to symbolic computation, symbolic manipulations) for the problems of mathematical analysis (as distinguished from discrete mathematics). Numerical analysis ..., Newton's method, also known as the Newton–Raphson method, named after Isaac Newton Sir Isaac Newton (25 December 1642 – 20 March 1726/27) was an English mathematician A mathematician is someone who uses an extensive knowledge of mathematics Mathematics (from Greek: ) includes the study of such topics a ... and Joseph Raphson Image:Raphson.gif, upBond signed by Joseph Raphson on his admittance to the Royal Society Joseph Raphson (c. 1648 – c. 1715) was an England, English mathematician known best for the Newton–Raphson method. Biography Little is known about Raph ..., is a root-finding algorithm In mathematics and computing, a root-finding algorithm is an algorithm for fi ...
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Budgets
A budget is a financial plan for a defined accounting period, period, often one year. It may also include planned sales volumes and revenues, resource quantities, costs and expenses, assets, Liability (financial accounting), liabilities and cash flows. Companies, governments, families, and other organizations use it to express strategic planning, strategic plans of activities or events in measurable terms. A budget is the sum of finances allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them. It may include a balanced budget, budget surplus, providing money for use at a future time, or a deficit in which expenses exceed income. Etymology and definition The word budget comes from the Old French word meaning "small leather purse", which in turn is a diminutive of the Gaulish language, Gaulish for "leather pouch, purse". Its first use in our contemporary understanding of a financial plan comes from the pamphlet ''Th ...
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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 Management accounting, 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 activit ...
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Financial Modeling
Financial modeling is the task of building an abstraction, abstract representation (a mathematical model, model) of a real world finance, 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 Craft, tradecraft, such as welding, or a science—the task of fin ...
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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 statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...s of a company and shows the company's revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive reven ...s and expenseExpenditure ...
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Management Accounting
In management accounting or managerial accounting, managers use accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been called the "languag ... information in decision-making and to assist in the management Management (or managing) is the administration of an organization An organization, or organisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, -ize (-isation, -iz ... 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 directors inside an organization to make decisions. This can also be known as cost accounting. This is the way to ...
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Outline Of Finance
The following outline Outline or outlining may refer to: * Outline (list), a document summary, in hierarchical list format * Code folding, a method of hiding or collapsing code or text to see content in outline form * Outline drawing, a sketch depicting the outer edg ... is provided as an overview of and topical guide to finance: Finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available which could ... – addresses the ways in which individuals and organizations raise and allocate monetary resources A resource is a source or supply from which a benefit is produced and that has some utility. Resources can broadly be classified upon their availability — they are classified into renewable and non-renewable resources. They can also be classif ... over time, taking into account the risk ...
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Profit
Profit may refer to: Business and law * Profit (accounting) Profit, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which h ..., the difference between the purchase price and the costs of bringing to market * Profit (economics) An economic profit is the difference between the revenue a commercial entity has received from its outputs and the opportunity cost In microeconomic theory Microeconomics (from Greek prefix ''mikro-'' meaning "small" + ''economics'') ..., normal profit and economic profit * Profit (real property) A profit (short for ''profit-à-prendre'' in Middle French Middle French (french: moyen français) is a historical division of the French language French ( or ) is a Romance language of the Indo-European family The Indo-European la ..., a nonposses ...
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