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Purchase price allocation (PPA) is an application of goodwill accounting whereby one company (the acquirer), when purchasing a second company (the target), allocates the purchase price into various assets and liabilities acquired from the transaction.
If the price that one is paying is equal to the mental reference price for the good, the transaction value is zero. If the price is lower than the reference price, the transaction utility is positive. Total utility received from a transaction, then, is the sum of acquisition utility and transaction utility.
Such modification costs include labor, supplies or additional material, supervision, quality control, and use of equipment. Principles for determining costs may be easily stated, but application in practice is often difficult due to a variety of considerations in the allocation of costs. [6] Cost of goods sold may also reflect adjustments.
The aim of price theory is to allocate a price for a good such that the supply of a good is met with equal demand for the product. [21] If a manager sets the price of a good too high, the consumer may think it is not worth the cost and decide not to purchase the good, hence creating excess supply.
Today's term: asset allocation. In the most basic sense, asset allocation is simply how one's assets are divided among different asset classes, such as cash, stocks, bonds, real estate, and so on ...
The anchoring effect was also found to be present in a study in the Journal of Behavioral Finance in relation to stock purchase behavior. [9] The study found that when using an app-based stock brokerage, an investor’s first stock purchase price serves as an anchor for future stock purchases.
Asset allocation and risk management: Proper asset allocation is fundamental to managing risk and aligning your portfolio with your financial goals. Without a thoughtful allocation strategy, you ...
This phenomenon is a result of the brain's instinctive (and rational) treatment of the transaction costs involved in acquiring a product as part of the purchase price of that product: The more involvement that a purchase requires or the purchaser puts in, the more dissonance or psychological discomfort the buyer will experience if dissatisfied ...