8-1 Discussion Financial Statement Confidence
Contemplate how management systems and accounting information can aid organizational decision-making.
The management systems and accounting information are data-driven to give insight to what the company’s progress.
“Managerial accounting information is used by company management to determine what should be sold and how to sell it.” (Freedman)
Determining what should be sold and how to sell will help in implementing a good marketing strategy. Combining this with relevant cost analysis will help to determine which products to sell and to whom. If managers did not have access to this information, it would be like trying to selling cars to the blind.
Share what tips or suggestions you would provide to peers to encourage confidence when reviewing financial statements for the first time.
My thoughts of reviewing financial statements after the first time is the same as when we learned to read the alphabet and words. It takes practice, practice and more practice—the more documents are reviewed the more familiar you become--building a better understanding and confidence.
Also, if all else fails, the internet is a great research tool. It can help you to better understand what you are viewing. For example, the balance sheet— “Think of it this way: if you liquidated all of your assets and then paid off all the debts you owed, the amount left over would be your “owner’s equity”. (Youderian, 2013)
Additionally, are there any resources that come to mind that would help a “beginner” to review and comprehend financial statements?
The US Securities and Exchange Commission (SEC) offers a guide that will help beginners to better understand financial statements. An example of the clear, concise language that is used to clarify the statements and their functions.
“There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time. Cash flow statements show the exchange of money between a company and the outside world also over a period of time. The fourth financial statement, called a “statement of shareholders’ equity,” shows changes in the interests of the company’s shareholders over time.” (SEC)
Beginner’s Guide to Financial Statements, https://www.sec.gov/investor/pubs/begfinstmtguide.htm
Youderian, Andrew; How to Read a Balance Sheet (The Non-Boring Version); http://www.ecommercefuel.com/how-to-read-a-balance-sheet/; 2013OCT17.
Freedman, John; Why Management Accounting Is Important in Decision-Making;http://smallbusiness.chron.com/management-accounting-important-decisionmaking-53947.html.
8.1 Financial statements, - standards and dataCOLLAPSE
Three things that will affect your decisions based on your companies financial information is industry standards, historical data, and the type of accounting standard used for your financial records.