By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold. Requirement 2 - A Generally, the lower of cost or market method is used to value inventory in order to “avoid reporting inventory at an amount greater than the benefits it can provide” (Spiceland, Sepe, & Nelson, 2013, p. 476). According to Spiceland, Sepe, and Nelson (2013) the “change in replacement cost usually is a good indicator of the direction of change in selling price” (p. 477). When the change in replacement cost is negative the LCM method allows companies to apply the conservatism principle. The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle).
Preferences are individual- who knows what is in your best interest. 3. The best way to predict how people will behave is in their own best interest as the see it. - Market economy is based upon the belief that individuals act in their own self interest the community as a whole will benefit - We don’t need a central authority to tell us what to do to get things accomplished in the economy. 4.
List three impulse convenience goods that you or someone you know has purchased. (You do not need to use complete sentences. 0.5 points) 11. Which step of the decision making process for major purchases do you think is most difficult for you? Why?
Free market Economy The term free market economy primarily means a system where the buyers and sellers are responsible for the choices they make. Free market gives the absolute power to prices to determine the of goods and services. These prices, in return, are set by the forces of supply and demand of a respective product. In cases of demand falling short of the supply of a respective product. Free market economy is also characterized by free trade without any tariffs or subsidies imposed by the government.
Case Study pg. 307 1. I agree that what they have chosen to do will suit the company fine there shouldn’t be anything that is needed to be added. 2. Coupon – Is a voucher that entitles somebody to a discount, refund, or gift, typically issued as a sales promotion.
Also, all firms produce a homogenous product, with little to no branding, where products are perfect substitutes for each other in the market such as milk. In addition, there is perfect mobility, so buyers do not incur any cost for moving from one seller to another. Lastly, buyers and sellers possess perfect knowledge of the prices and the output, therefore if one seller charges a higher price than the market price, buyers will move elsewhere. Hence the firm has to accept the market price if it wishes to sell its products in the market. The market price becomes the firm’s demand curve and this would be perfectly elastic since perfect
The optimization and equilibrium are closely connected and using specific set of assumptions one can deduce a benchmark model of 'perfect' competition productive of bringing about Pareto optimality. The model of perfect competition is the one where firms exhibit no market power and act as price takers had been seen as benchmark against which other market structures
Lockean rights require that people must refrain from acting in certain ways, in particular refrain from interfering with others. Nozick’s theory of economic justice, which is called ‘entitlement theory,’ maintains that people are entitled to their holdings (for example, goods, money and property) as long as they have acquired them fairly, meaning that they have been acquired without violating anybody’s Lockean rights (Shaw, Barry, & Sansbury, 2007 (a)). Nozick’s entitlement theory has three principles, acquisition, transfer, and rectifying injustice in holdings. Acquisition refers to the fact that a person who acquires a holding without violating anyone’s Lockean rights is entitled
CAPM Model is used in calculating re. Since we chose CAPM model to calculate re, then the assumptions of the CAPM Model have to be followed correspondingly. (Some important assumptions of the CAPM Model: 1) Investors are rational and risk-averse 2) Investors are price takers 3) There is no transaction or taxation costs 4) Investors may lend and borrow unlimited amounts using the risk free rate 5) Investors have the same information at the same time, etc. 2. rd and re remain constant for Midland and each of its three divisions For simplicity, I assume rd and re remain constant. 3.
As derived by Fisher (1930), when ‘perfect capital markets’ exist (see below for conditions), when a firm only chooses projects with a positive NPVs, they will maximise shareholder wealth. The following conditions for perfect capital markets are: - Same capital market interest rates, returns and prices for all - Free and equal access to capital markets - No participants have any market power over prices - All participants have the same information - No taxes that distort economic decisions Fisher’s separation theorem states that the firm’s investment decision is independent of the preferences of the owner, and that investment decision is independent of the financing decision. This means that investment and financing decision can be separated out, and that the type of owner the firm has does not need to be accounted for when making investment