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The Business and Accounting Advisor

Business survivability in this economy is difficult at best. This blog will offer useful business and accounting advise and ideas for ongoing business and competitive advantage.

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Regional Representation or Local business support. The argument for Karen Crowe.

October 18th, 2011 at Tue, 18th, 2011 at 1:05 am by glennsmith

Completeness and accuracy is an interesting concept in accounting. To be complete would normally mean all inclusive but the problem with including everything at least in accounting is that there are principles such as the cost benefit principle. Including every item of information in the financial statements would make the smallest company’s financial statements unmanageable. Too much information is definitely applicable here. Consolidations and management accounting would become more than burdensome. Comparing industries information of the size possible would be difficult so what do we do as a profession? We begin to use comparisons such as means, standard deviations from the norm and other variables. We will examine two information streams to understand this concept better.

If we examined, for example, working capital only we miss large amounts of related information. Working capital is simply current assets minus current liabilities. Any positive value means that a company has current assets to use for company growth purposes. Knowing that company has working capital is not a largely useful piece of information. We must make both horizontal and vertical analysis. We can take comparisons over the entire company financial information as long as we use information spread out over years. We can use company to company information as long as we don’t use to many companies. Not using enough companies or even industries we may lack some credible and important information.

This is one large reason for the advice I received by many of the Tier three participants of the last Colloquia. They told me that I should not try to change the entire world with my dissertation but save changing the world until after the doctorate was earned. I agree. A dissertation topic of attempting to determine how much affect a larger city has on smaller cities. Affect in what way? Having simply one piece of information may not be helpful. Having one measure, for example, the total population size of the big city to the total population size of a small city may not be a helpful comparison. If we were to take every city around the city of Seattle and compare standard deviations this may be much more useful. Understanding city size across the United States may be too much information but if we were to look at standard deviations and means of these comparative cities we may find some excellent useful information such as presented by the Center for City Park Excellence (Excellence, 2010).

The Center for City Park Excellence took the population sizes of the 85 different cities and coming up with the mean for all the cities. Taking the standard deviation for the cities to compare the total land area of each city compared to the population and population density was the next step. It was interesting to me to find that the population of Seattle is vastly superior in regards to land size than the mean. This may be useful in explaining the city size growth of many of the smaller and midsize cities such as Maple Valley and Covington. Taking this information and comparing it against growth in the population size could easily highlight some interesting informational statistics and possibly change the attitudes and actions of elected officials. This could easily change public opinions about those representatives in our area, for example, such as our own Mayor Gerken who take the time to develop regional connections and relationships. On the other hand it could argue for those that take more time developing the city of Maple Valley businesses and less time neglecting the needs of smaller cities such as ours according to Garmenstani, Allen, Gallagher, and Mittelstaedt (2007) smaller cities exhibit higher growth rate. Unfortunately, Garmenstani, Allen, Gallagher, and Mittelstaedt do not use standard deviations, or means to demonstrate the quantifiable information necessary to make the best possible assessment.

Fee and Hartley (2011) argue that population growth is largest in east coast, west coast, and warmer cities within the United States. They use population means and average but do not report standard deviations making a comparison more difficult because of the simple size of the comparative base. Fee and Hartley make the claim that average January temperatures explain 11% of the population growth variation. I find it difficult to back up their information due to the lack of data comparisons offered. Fee and Hartley do argue that another contributing factor to population declines can be attributed to employment decreases in the manufacturing sector for the United States. Those individuals in office and have not supported local business within our area would do well to notice this correlation. Again this author used only mean and average comparisons. Seeing the standard deviations would have been helpful. The author gives no report on sample size. The author did state they received their information from the U.S. Census of 2000 and 2010. A statement that I find difficult to back up stated that it is equally possible that people are moving where jobs are or that companies are locating where population density is growing. Neither of the last two sources reported standard deviations.

Excellence, C. f. C. P. (2010). City Population Density.

Fee, K., & Hartley, D. (2011). Growing Cities, Shrinking Cities. [Article]. Economic Trends (07482922), 27-29.

Garmestani, A. S., Allen, C. R., Gallagher, C. M., & Mittelstaedt, J. D. (2007). Departures from Gibrat’s Law, Discontinuities and City Size Distributions. [Article]. Urban Studies (Routledge), 44(10), 1997-2007. doi: 10.1080/00420980701471935

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