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Ratio Analysis And Equity Valuation System

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Generally, this main research topic of the study is “Positive Accounting Research.” Moreover, it should also be noted down that, in the present time of competitive business and corporate financial era, it is essential and more important for the companies or firms to effectively adopt and use positive accounting theory in order to enhance the organizational performance. Today, positive accounting theory is used as one of the most effective and innovative tools by the companies or firms to maximize financial as well as economic performance of the company.

Positive accounting is also a broader term that helps the firms in creating causal explanations of human behavior in accounting settings. Positive accounting is also assists the companies improving financial performance and conducting accounting and financial tasks more appropriately. Positive accounting is also necessary for the companies because it provides strategic directions about how to maintain market share, overcome accounting errors, conduct financial/accounting functions and bring innovation and development within the current processes. In the same way, Management each and every organization must focus on using positive accounting theory in their workplace practices for the total success.

The key aim of the Critique is to understand and evaluate the roles and importance of positive accounting developing causal explanations. Moreover, understanding the significance and value of positive accounting theory in the fortitude of accounting standards is the key objective of the critique. In addition to this, developing a clear understanding about the accounting theory, accounting concepts, accounting standards is also the key aim of this paper.


Structure of the Paper:

Basically, the structure this research paper is effective because the overall study is divided into different parts in order to fulfill the aims and objectives of the paper. For example, the first part of the study is about introduction in which a general description about the research topic would be given. Moreover, the aims/objectives of the Critique and the main arguments of the paper would also be presented. Finally, information about the overview of the paper would also be given to understand the objectives and aims of the study. The second part of the research paper is about the Article summary which the main arguments of the given research article such as: Half a Defence of Positive Accounting Research would be presented by considering aims, findings, theoretical arguments and contribution of the article. The next part is Research Question which research questions related would be identified from the research article. Theoretical Framework is the fourth part of the research study, in which the conceptual and theoretical framework would be presented.  Moreover, in the significance and limitations of the Article part of the paper, the main merits and demerits would be discussed. Finally, in the conclusion, overall main findings and implications would be summarized. 

In this research article, the author had defined and explained the concepts, significance and value of positive accounting theory in the context of research program. In addition to this, it can also be summarized that, positive accounting theory is one of the most specific and fundamental branch of academic accounting research that mainly analyze and forecast real world accounting practices (Dunmore, 2009). In the same way, positive accounting is plays a key role in the predicting the real words events and interpreting that events to the accounting transaction. On the other hand, the study conducted by the researcher in the article involve positive theory of accounting in a broad sense of research programs which Management major objective and purpose is to develop and create causal explanations of human behavior in accounting settings (MacLullich, 2003).

At the same time, the study is also observes the positive accounting approach to the accounting research. Moreover, it can also be summarized that, positive accounting research is one of the major branch and element of the wider intellectual project of scientific research that utilized in order to recognize the cause & effect relations. It is also explained by the researcher in the study that, positive accounting research is characterized with a lot of importance as well as deficiencies that could be reviewed by using wider intellectual project with project’s epistemological & ontological assumptions (Hay, Knechel, and Wong, 2006). Furthermore, this study is also analyze and evaluate various kinds of serious deficiencies that performed by the positive accounting research. This indicates that, in conducting of positive accounting research, various serious issues and challenges are faced directly (Dunmore, 2009). 

Along with this, the real aim and objective of the positive accounting may be dissimilar, if the positive accounting research is not well-established. It is also explained by the author in the research article that, positive accounting research may also be used as a paradigm which is best in order to solve accepted puzzles within a social group which allow & rewards such puzzle-solving regardless of the social or intellectual contribution to be derived from the solutions (Riahi-Belkaoui, 2004). On the other hand, it is also defined that, positive accounting theory or research is also important and more valuable for the companies or firms in order to make true assumptions in the context of real world events. Hence, positive accounting research brings innovation within the accounting and financial transactions (Hodge, Kennedy, and Maines, 2004). 


At the same time, it is also accessed and analyzed from the given research article that, the phenomena of accounting are sourced by the operation of rational self-interest between the parties who cooperate by the implied or express contract in the different kinds of business firms. This could also consider not only accounting choices by the company’s business managers but also the reporting and pricing conclusion by the auditors (Porter, and Norton, 2008). Moreover, it is defined by the author that, there are several areas of positive accounting research that do not draw significantly on the theoretical model. Furthermore, positive accounting theory does not have wider scope and broader areas as compare to the positive research programs. It indicates that, both positive accounting research and accounting research are not similar. Hence, there are a lot of differences exist among the Management positive accounting research and accounting research (Ittner, Larcker, and Meyer, 2003).            

It is also accessed that, several types of accounting research analyze the behavior in accounting settings without assuming rational behavior that affects users’ ability to absorb it. Moreover, it can be said that, in this research study, the researcher had analyzed, explained, and investigated the epistemology as well as ontology of positive research and analyzed how the in-progress practices of accounting research falls short of what is required to operate the research program successfully. Finally, the author had investigated and focused the theoretical models, need for much better measurement, need for data archives of measurements of important concepts and need for extensive replication (Dunmore, 2009).       

Research Question

The research article is characterized with a lot of research objectives, questions and purposes. The following are major research questions identified from the given research article. 

  • How the positive accounting theory is more valuable in relation to research program?
  • Is positive accounting theory a branch of academic accounting research?
  • What are the key roles of positive accounting in predicting the real words events?
  • What is the major objective of accounting research programs?
  • Explain how positive accounting research could be a branch of wider intellectual project of scientific research
  • What are the major importance & deficiencies associated with the positive accounting research?
  • What are the main consequences if accounting research is not entrenched?
  • How positive accounting research may be used as a paradigm?
  • Is positive accounting theory has less scope as compare to positive research programs?
  • What are the key differences among the accounting research and positive accounting research? (Watts, and Zimmerman, 1990).
  • What is the epistemology & ontology of positive research in accounting?

Theoretical Framework

The study had explained various fundamental theoretical concepts in the area of accounting. For case, in the study, the theoretical concept related to the positive accounting theory, positive accounting research, academic accounting research, ontology, epistemology had explained very clearly and accurately. This theoretical framework could help the readers, students and researchers in understanding of importance of positive accounting research and positive theory of accounting (Kealey, Lee, and Stein, 2007). Moreover, the study has wider Management scope and provides opportunity to the students to effectively analyze the differences among accounting research and positive accounting research and apply them in their real life or workplace. The concepts identified in the research could also help the readers in enhancing their skills, and knowledge in the areas of accounting (Nissim and Penman, 2001).

At the same time, the study is also more important and valuable because it clearly indicates the roles of positive accounting and positive accounting research in predicting the real words events. The learners could also able to understand the concept associated with the accounting research programs in effective and proper manner. Moreover, the research is also provides a brief discussion and analysis about the intellectual project of scientific research and consequences of accounting research (Humphrey, 2008). Furthermore, with the help of study, the students or learners could also understand the deficiencies as well as significance of positive accounting research. For case, the readers could be able to use positive accounting research as a paradigm. Along with this, the study is clearly explains different theoretical concepts such as: ontology and epistemology positive accounting research and dissimilarity among the accounting research and positive accounting research (Libet, 2002).

Significance and Limitations

The following are the significance as well as limitation of the research study such as:

The main significance of the study is that, it does not focus only on the theoretical concepts but also provide practical suggestions and information on of positive accounting theory & positive accounting research. Moreover, the study is also offer deep insight information on positive accounting theory and research by considering the practical & theoretical aspects. The study also has different accounting application that could be used at the workplace. On the other hand, different types of accounting related concepts, methods, and theories are proposed in the study to effectively understand the research. Finally, discussion on the accounting models, theories, and standards is also given to address the research questions properly (Schulz, and Cheng, 2002).

The researcher had not used research methods properly to attain the key aims and objectives of the study. For example, both data and information is not presented properly graphically. Research shows lack of data for the further research that is a key issue in the study. Moreover, there is no proper and accurate use of both the methods such as primary and secondary to attain the research objectives. Interview, survey and questionnaire methods are not used in the study properly to get the real information about the study. In addition to this, it is also important to know that, the research had mainly focused on using of secondary source of information instant of primary method. The overall study indicates that, there is no relation among the research objectives and aims (Lobo, and Zhao, 2013).



Based on the above analysis and research, it can be concluded and summarized that, positive accounting research is more important and valuable for the firms than positive accounting. In addition to this, it can also be concluded that, business firms must use positive accounting in order to conduct the research program to access the real world events. On the other hand, it is also accessed that, positive accounting theory is known and considered as a branch of academic accounting research and predict the real words events. Moreover, positive accounting research is also adopted and utilized by the companies and firms as a part of  wider intellectual project of scientific research in order to conduct the business transaction related to accounting and finance. At the same time, it can also be concluded that, positive accounting research provides a lot of valuable benefits to the companies but it deals with the several deficiencies that could be addressed by using appropriate accounting theories and standards.



Dunmore, P.V. (2009).  Half a Defence of Positive Accounting Research. Available At: [Accessed On: 28 April 2017]

Hay, D. C., Knechel, W. R. and Wong, N. (2006). Audit fees: A meta-analysis of the effect of supply and demand attributes. Contemporary Accounting Research 23 (1), pp, 141–191.

Hodge, F. D., Kennedy, J. J. and Maines, L. A. (2004). Does search-facilitating technology improve the transparency of financial reporting? The Accounting Review 79 (3), pp, 687–703.

Humphrey, C. (2008). Auditing research: A review across the disciplinary divide. Accounting, Auditing & Accountability Journal 21 (2), pp, 170 – 203.

Ittner, C. D., Larcker, D. F. and Meyer, M. W. (2003). Subjectivity and the weighting of performance measures: Evidence from a balanced scorecard. The Accounting Review 78 (3), pp, 725–758.

Kealey, B. T., Lee, H. Y. and Stein, M. T. (2007). The association between audit- firm tenure and audit fees paid to successor auditors: Evidence from Arthur Andersen. Auditing 26 (2), pp. 95–116.

Libet, B. (2002). The timing of mental events: Libet’s experimental findings and their implications. Consciousness and Cognition 11 (2), pp. 291–299.

Lobo, G. J. and Zhao, Y. (2013). Relation between audit effort and financial report misstatements: Evidence from quarterly and annual restatements. The Accounting Review, 88(4), pp, 1385-1412.

MacLullichConclusion, K. (2003). The Emperor’s ‘new’ clothes? New audit regimes: Insights from Foucault’s Technologies of the Self. Critical Perspectives on Accounting 14 (8), pp. 791.

Nissim, D. and Penman, S.H. (2001). Ratio Analysis and Equity Valuation: From Research to Practice. Review of Accounting Studies, 6, pp, 109–154.

Porter, G. and Norton, C. (2008). Financial Accounting: The Impact on Decision Makers (6th ed.). USA: Cengage Learning.

 Riahi-Belkaoui, A. (2004). Accounting Theory. USA: Cengage Learning EMEA.

Schulz, A. K. D. and Cheng, M. M. (2002). Persistence in capital budgeting reinvestment decisions — personal responsibility antecedent and information asymmetry moderator: A note. Accounting & Finance 42 (1), pp, 73–86.

Watts, R. L. and Zimmerman, J. L. (1990). Positive accounting theory: a ten year perspective. Accounting review, 131-156.


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