Decision Usefulness approach vs. Measurement Approach

Decision Usefulness approach vs. Measurement Approach Research Paper example
Undergraduate
Research Paper
Finance & Accounting
Pages 5 (1255 words)
Download 0
Decision Usefulness approach vs. Measurement Approach Table of Contents Decision Useful Approach 3 The Single-Pearson Theory 3 The Rational Investor 4 The principal of portfolio Diversification 5 The Optimal Portfolio Investment 5 Portfolio Risk 6 Measurement Approach 6 Reasons for Market Response 7 Market Efficiency of Securities 8 Ohlson’s Clean Surplus Theory 8 Auditors’ legal liability 9 Asymmetry of investor Losses  9 Role of Financial Accounting on both Approaches 9 Works Cited 11 Decision Useful Approach This approach motivates the application of decision models…

Introduction

The Single-Pearson Theory The Single-Pearson decision theory aims to understand how an investor makes rational decisions under circumstances of certainty. The theory appreciates the concept of information and enables decision makers to keep informed and modernize their beliefs. The concept uses the publicly available financial statements as source of information. Consider the following illustration to understand the concept, An investor X has $ 20000, and he has the option to invest in either in shares of ABC ltd or 2% Government bonds. The decision of X will depend on whether the future performance of ABC ltd. (good or bad). ...
Download paper
Not exactly what you need?

Related papers

Sustainability and Integrated Reporting - A New Approach
The benefits and challenges of this reporting is looked into and the need to adopt in corporations. Woolworth, a categorical large corporation is analysed in regards to the extent it has adopted integrated accounting. Guidelines for integrated reporting are set out globally through various bodies like the International integration reporting committee amongst others. The meaning of sustainability…
Activity Based Costing vs.Traditional Approach (Sober Plc)
Financial information forms the basis for much of the decision-making for organizations, and the need for more accurate information continues to grow. Ignorance of the manufacturing realities may put an organization at risk of losing its competitive edge, which inevitably results in loss of profitability and crippling losses. Traditional volume based costing techniques present numerous challenges…
Why Caledonia Has to Adopt Free Cash Flows Approach and not Accounting Profit Approach?
Moreover, it involves financial instruments such as inventory, which the corporation can easily convert into money. The cash flow statement can highlight the economic position of the firm and its solvency capacity within that financial period. Alternatively, the accounting profits refer to the gain or loss of the investment of the entrepreneur after the accumulative revenues are subtracted from…
Usefulness of the annual report for investment decision making purposes
Certain investors have gained knowledge in accountancy and they use the figures provided in annual reports before coming up with an investment decision. Others use information that is related to organization’s financial conditions and does not contain figures but only facts to make investment decisions. …
FREE-MARKET APPROACH AND REGULATORY APPROACH TO STANDARD SETTING IN ACCOUNTING
The researcher analyzed the free market approach to standard setting and provided a case study analysis to this approach. Within the free-market approach, the study revealed some theories including the positive accounting theory and agency theory, which recommends that entities should have incentives to make publicly accounting information munificently. The study also examined the regulatory…
normative approach and positive approach
Among various source of income, business needs to maintain everyday transactions, this are known as accounting methods. Accounting theory can be defined as the study, which helps to examine the methodologies of the assumptions, with their frame work in financial accounting principles. By the study on accounting theory helps to understand the review the historical foundations of the accounting…
Universal Accounting Approach &Cross Border Investment
Without these accounting standards each and every business entity would have to develop their own accounting standards that would make the comparison of financial information of different business enterprises difficult. The interests of the financial activities of the individual and institutional investors have become global recognizable and there has been active involvement of various…