HIGH POINT, N.C., May 27, 2015 – A new article co-authored by Dr. Jo Lacy, assistant professor of accounting at High Point University, explores how well accounting students are prepared to analyze their client’s investment decisions when they enter the workforce. The manuscript, titled “Depreciation’s Effect on Capital Budgeting Metrics Needs More Educator Focus,” is included in the most recent issue of the American Journal of Business Research.
In the study, Lacy and her co-author asked graduate students from various universities to use financial statement information to analyze the benefit of a potential capital investment project.
The results show that accounting students are not well equipped to analyze business decisions related to the budgeting of capital projects. Very few of the students (6 percent) were able to correctly calculate the capital recovery/tax shield provided by the investment. The study also found that changing the format of the statement of cash flows did not improve students’ accuracy, which Lacy says is an important finding since accountants should be prepared to analyze statements regardless of their format.
While the information came from universities around the nation, Lacy says she is using it to enhance curriculum for students at HPU who are studying accounting.
“Our findings indicate that accounting students are ill prepared to address the effects of non-cash items regardless of the method of reporting that is used,” Lacy says. “Numerous studies have examined the weaknesses of newly hired accountants’ analytical skills related to capital budgeting, but our study extends that research and offers new information that will help us as educators do a better job of preparing future accountants to be great resources and advisers for their clients.”