Does the completion of financial reports adversely affect firms' strategic decision-making?
The definition of "adversely" can be described in the following way "when decisions, conditions or effects are unfavourable to you" (Collins Cobuild English Dictionary). This question is asking whether the results of the completion of a financial report is harmful to a business' planning and direction, through making strategic decisions. The answer is an initial "yes." However, there are alternative factors that cannot necessarily be represented on a balance sheet, a profit and loss account, or any other type of financial report. Contingent factors such as technology i.e. the nature of the production process involving the ensuing battle between labour and machine-intensive operations, the environment e.g. competition levels, and the structure and type of organisation, have huge effects on future planning. As a result of this, the question has to be asked whether the decision-making is ideally short or long-term. In the short-term, a manager is looking for a profit and a healt!hy balance sheet. His/her strategic vision of stability and growth would come in the longer-term. To decide what is the most important requires suitable information. The value of information and who exactly uses it will be discussed so as to try and realis
For example, if profitability levels are considered too low, steps may well be made to increase profitability by r!educing wage levels or increasing productivity. This is an example whereby the financial report, with the use of valuable information, aids the firms' strategic decision-making. These three departments all have differing corporate objectives, some of which are focused on in the short-term, and others in the long-term. "The purpose of the balance sheet is simply to set out the financial position of a business at a particular moment in time" (Financial Accounting for Non-Specialists, page 24). e that the effectiveness of strategic decision-making is all based on suitable information. Valuable information is that which "may cause a change in any planned course of action" (Accounting for Management Decisions, page 19). ' These can be defined as "a general statement of the sense of direction in which senior management wants to see the company move over the long-term" (Managerial Economies, page 348). These examples prove that management need to achieve the short-term before they can even consider the long-term goals. ------------------------------------------------------------------------**Bibliography**. The question of whether accounting fails to represent different 'resources' such as the environment can be answered with a firm "yes. If a firm just relies upon assessing financial reports to make decisions, what would the management be leaving out? Well, according to Emmanuel and Otley (1985) "a firms' ultimate survival is determined by the degree in which it adapts and accommodates itself to environmental contingencies" (Accounting in a Business Context, page 222). However, there is often a separation of departments within a company into the finance, marketing and production. A financial report will always centre on accounting. ) This will affect the other company's sales, therefore cash and very likely, profitability will fall. The valuable information which can be represented on a balance sheet, such as profitability levels, will affect strategic decision-making.
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