Question

Deliberate on why it is crucial to understand accounting and financial management fundamentals? Discuss how accounting information and financial analysis facilitate decision making. Give examples. What advice would you give to your team regarding utilizing financial information more effectively?

Answer 1

Accounting is essential if you want to improve your business in such a way so that it can be measured and predicted as well. Having a system of tracking business' assets, liabilities, and income lets you take smart and informed business decisions based on the previous performances along with present financial health of your enterprise.

Fundamentals of Financial Management

it is very important to understand fundamentals of financial management to make important decisions in business.

Investment Decision:

The investment decision is one of the most important decisions for a firm to increase value creation.

The investment decisions are the most important decisions of the firm and the main focus is the firm’s capital investment.

When we indicate to a particular decision that is connected to financial managers, we are talking about decisions pertaining to a capital project.

Financing Decision :

A person with expertise in the field of financial management and responsible for monitoring a company’s finances, maximizing profits and take care of tax laws and regulations.

Asset Management:

The financial manager has to do more focus on operating responsibility for existing assets.

These responsibilities demand that the financial manager has to be more concerned with the management of current assets rather than fixed assets.

Responsibility for the management of fixed assets would reside a large proportion with the operating managers who employ these assets.

Accounting information allows a business to keep track of all its financial transactions. It is the process in which the company records and reports all the financial data that go in and out of its business operations. The accounting data is recorded on a series of financial statements including the balance sheet, income statement, and cash flow statement.

There are three main areas where financial accounting helps decision-making:

• It provides investors with a baseline of analysis for and comparison between the financial health of securities-issuing corporations.
• It helps creditors assess the solvency, liquidity, and creditworthiness of businesses.
• Along with its cousin, managerial accounting, it helps businesses make decisions about how to allocate scarce resources.

it is important to know how to effectively analyze and utilize the financial statements of a firm. This requires an understanding of three key areas:

1. The structure of the financial statements
2. The economic characteristics of the industry in which the firm operates and
3. The strategies the firm pursues to differentiate itself from its competitors.

Financial information gives a complete look about the financial status or profitable status of the firm, so team can take necessary measures to improve the Firms status or bring the firm into profitable state and can be more successful than the competitors of the business.

I hope my answer was help ful for you... Thank You :-)