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What Is the Positive Accounting Theory?

By Lyle DalyUpdated Apr 3, 2025 at 12:09 PM

Key Points

  • Positive accounting theory explains real-world accounting choices influenced by management's financial goals.
  • It generates hypotheses like managers aligning accounting methods to secure bonuses or avoid debt penalties.
  • Understanding these practices aids investors in critically analyzing company financials beyond face value.

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