Linear Programming in Finance, Accounting and Economics

3078 WordsApr 12, 201313 Pages
Linear Programming in Finance, Accounting and Economics Sijia Lu 7289928683 Abstract This article is literatures review about five articles, which apply linear programming to Finance, accounting and economics. The mathematical method is found of crucial importance in those fields. The paper shows how theoretical inference in linear programming throws light upon realistic practice, and how empirical evidence supports those theories. Keywords: finance; accounting; economics; linear programming; investment analysis Linear Programming in Finance “Application of Linear Programming to Financial Budgeting and the Costing of Funds” explored how to allocate funds in an enterprise by applying linear programming. As Charnes, Cooper and Miller…show more content…
An Example “A linear programming model for budgeting and financial planning” created an accounting experiment in which the dual variables introduced earlier were calculated which can also be considered as a sensitivity analysis. This can be seen as application and verification of Charnes, Cooper and Miller’s earlier theory. In the linear programming problem listed below, (1) represents the interests earned with a rate of 0.229%; (2) holds because firm’s sale of securities will not be more than the beginning balance of this amount; (3) represents the maximum collection of receivables will not exceed the beginning balance of account receivable; (4) means the initial cash balance constraints the purchase of securities; (5) indicates “contribution” on a unit sale per unit deduction from the ending goods inventory, with prevailing selling price being $9.996 and cost of production $2.10; (6) holds because of the cost structure: in the $2.10 cost, $1.0 is the material cost and $1.1 is the conversion cost (direct labor cost and direct overhead); (7) represents the production capacity limits by limiting the value of raw materials; (8) holds because conversion is also limited to raw materials at the beginning of the period; (9) means market limit to the sales by constraint on the standard cost; (10) means sales are also limited because it can not be more than the beginning balance of completed goods; (11) represents the repayment of loans will not

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