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- Title
Rate of Return.
- Authors
Scorgie, M. B.
- Abstract
The article examines the use of the concept of the rate of return on capital in accounting. The use of the concept has a long history. The post-war growth of awareness of and literature on the subject is symptomatic of a changing attitude of accountants away from bookkeeping and towards an operational understanding. Contemporary accounting authors acknowledge the fact that similar methods have been used throughout the financial community for computing bond yields, insurance premiums and rates on leased facilities. However, the author of this article finds little reference in accounting literature to the debt that is owed to engineers and economists who wrote about this topic in the late nineteenth century and prior to the Second World War. Alfred Marshall, the eminent economist, discussed the concept in his principles. Possibly recent writers on capital budgeting have been too engrossed in the constant money value convention. The so-called cut off point is also explicitly mentioned by Marshall. The entrepreneur will push investment of capital until there seems to him no good reason for thinking that the gains resulting from any further investment in that particular direction would compensate him for his outlay.
- Subjects
RATE of return; ACCOUNTING; MARSHALL, Alfred, 1842-1924; CONCEPTS; CAPITAL investments; CAPITAL budget
- Publication
Abacus, 1965, Vol 1, Issue 1, p85
- ISSN
0001-3072
- Publication type
Article
- DOI
10.1111/j.1467-6281.1965.tb00313.x