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BALANCE SHEET ITEMS AS THE PRESENT VALUE OF FUTURE CASH FLOWS
Author(s) -
Bodenhorn Diran
Publication year - 1984
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1984.tb00766.x
Subject(s) - balance sheet , cash flow , balance (ability) , terminal value , economics , present value , cash , net present value , balance of payments , value (mathematics) , cash flow statement , business , finance , monetary economics , microeconomics , production (economics) , mathematics , medicine , statistics , physical medicine and rehabilitation
This paper develops balance sheets assuming that assets are future service potentials, or future cash flows. All balance sheet items are the present (discounted) values of future cash flows. All future flows, whether receipts or payments, including transactions with shareholders, are accounted for on the balance sheet. Balance sheets are constructed on the basis of (1) full knowledge of the future, and (2) knowledge only of past flows, assuming that investment projects have zero net present value. Capital gains (losses) are recorded when events demonstrate that projects have positive (negative) net present value.