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- Title
ADVANCE PAYMENTS DURING INFLATIONARY PERIODS.
- Authors
Barlev, Benzion; Livnat, Joshua; Yoran, Aharon
- Abstract
During periods of rising prices, contracts for future delivery of merchandise are usually linked to a price index to protect suppliers from future cost increases, and customers, therefore, advance payments to avoid the price linkage. Suppliers are then faced with two problems: (i) the investment of advance payments and (ii) the presentation of the investment outcome in the financial reports. This paper uses a portfolio selection process to analyse the suppliers' investment decisions, and shows that the accounting presentation depends on the particular investment decision, which in turn affects the principal-agent relationship. Suggestions are made to eliminate the undesirable effects of this relationship on management's decision making.
- Subjects
PRICE indexes; WAGE advances; SUPPLIERS; INDUSTRIAL procurement; DECISION making; DELIVERY of goods
- Publication
Journal of Business Finance & Accounting, 1982, Vol 9, Issue 3, p413
- ISSN
0306-686X
- Publication type
Article
- DOI
10.1111/j.1468-5957.1982.tb01004.x