Friday, February 12, 2010

Cost, price and value

Reposted from WEDNESDAY, APRIL 30, 2008 in the related blog: Tr-Ac-Net on Community Impact Accountancy

Dear Colleagues

The three most important numbers about almost anything are cost, price and value.

With a deep understanding of cost, price and value it is possible to explain much of the behavior of the economy ... and to understand why things are progressing or not.

Cost is a useful metric for productivity. Productivity goes up and it is likely that cost goes down.

Price and cost determine profit ... and this is the main driver of decisions in the for profit corporate space.

Value and cost determine value adding for society ... for the community.

Where price is positioned relative to cost and to value determines what proportion of the value adding that is captured by the corporate entity and that which remains for the consumer and public external to the corporate entity.

By careful presentation of price, it is possible for the corporate entity to get more of the value for itself than there is value ... which is what happened in, for example, the sub-prime mortgage debacle.

Corporate GAAP accounting is mainly about cost and price. Community Impact Accountancy (CIA) is a system that has both price and value in the analysis framework so that there can be a focus on performance in terms of community rather than just in terms of the corporate entity.

For more information please contact me.


Peter Burgess

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