The Essentials of Finance and Accounting for Nonfinancial Managers

When tangible assets are purchased and recorded on the balance sheet as fixed assets, their value must be allocated over the course of their useful life in the form of a noncash expense on the income statement called depreciation

Let’s review one example.

short-term investments

Its primary characteristic is that it is immediately liquid; it is available to the firm now

It represents immediately available purchasing power

The budget is not an accounting effort. It is a management process that may be coordinated by people with accounting backgrounds

Financial analysis provides valuable tools for decision making. Financial analysis of a proposed business decision requires disciplined forecasting. It requires that management quantify all of the impacts that a proposed decision will have on the profitability and financial health of their company. A careful, thoughtful, and thorough financial analysis/forecast provides assurance that all of the issues have been considered. Managers can then make their decisions based upon their forecast

There is nothing in accounting training that teaches accountants to deal with marketing and operational forecasting and decision-making issues

Accounting is somewhat precise. Forecasting, by its very nature, is very imprecise. When the preparation of the budget becomes “accounting-driven,” those preparing it focus on nonexistent precision and lose sight of the real benefits of the budget and its impact on the bigger picture

Keeping an existing customer happy is a great challenge.