A Logical Umbrella for Firm Evaluation: The Fundamental Relation (Un ombrello logico per la valutazione d'azienda: la relazione fondamentale)

La Valutazione delle Aziende, Vol. 54, pp. 26-33, September

13 Pages Posted: 26 Jul 2009 Last revised: 23 Sep 2010

See all articles by Carlo Alberto Magni

Carlo Alberto Magni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering)

Date Written: 2009

Abstract

This paper analyzes the relations among different concepts such as earnings, profit, interest, rate, consumption, dividend, installment, cash flow, capital. It aims at embracing these notions in a unique conceptual 'umbrella,' consisting of five perspectives: (1) accounting, (2) economic theory, (3) theory of finance, (4) loan theory, (5) financial mathematics. These notions and these domains constitute a seeming mishmash: in fact the hub of the umbrella is given by a unique fundamental relation, shared by all five perspectives and whose ingredients are capital, profit, and cash flow. On the basis of the fundamental relation, market value and book value of a firm are easily obtained.

Note: Downloadable document is in Italian.

Keywords: firm, capital, profit, interest, loan

JEL Classification: B41, M41, G11, G12, G31

Suggested Citation

Magni, Carlo Alberto, A Logical Umbrella for Firm Evaluation: The Fundamental Relation (Un ombrello logico per la valutazione d'azienda: la relazione fondamentale) (2009). La Valutazione delle Aziende, Vol. 54, pp. 26-33, September, Available at SSRN: https://ssrn.com/abstract=1439007

Carlo Alberto Magni (Contact Author)

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering) ( email )

Italy

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