The Way to Easy Profit Measurement
33 Pages Posted: 26 Jan 2003 Last revised: 10 Jun 2016
Date Written: December 20, 2002
This criticism of the Dutch textbook 'Jaarverslaggeving' by Epe/Koetzier is not confined to merely this book. In fact it concerns more rendered out of date books and pure bad education at many schools, institutes and universities all over the world. None of the various profit calculation systems, which are described by Epe/Koetzier around one and the same problem definition, do see justice done to the given data. One system this way, another system that way, all of them make selective choices out of the data. Everyone can easily see that no system meets all the data which should be expected to be quite normal. If such a simple sum cannot be solved thoroughly, what hopes are there of a real company getting its books correct? The several systems currently used lead to more than ten widely divergent 'solutions' even in the case of a classic example. Epe/Koetzier set out in detail what in economic literature is defended by advocates of several so-called profit calculation systems.
The actual solution to the problem of profit measurement is The Profit Formula(R) (re SSRN_ID324862). Anyone can learn to put it into practice. It is a piece of cake. To write down the problem definition cost more time, space and effort than the working-out of it. One can ask everything and demand any outcome according to this or that system, the fiscal profit or whatever. And of course the proven one and only real profit figure. All can be done easily by means of The Profit Formula(R).
Keywords: HC, FIFO, Average Unit-cost, Individual LIFO, Collective LIFO, IJzeren Voorraad-system, several RC-systems, Modern Nominalism, Edwards and Bell, System-Bakker, GPLA-system
JEL Classification: M41, M46
Suggested Citation: Suggested Citation