Accounting and Finance Accounting

Question: How does financial information affect decisions made managers with the success or failure of their companies ? Answer: Introduction In case of every business organizations, the importance of collection of financial information is inevitable for the business organizations. With the help of respective financial information, the prospective managers can analyze and implement different forms of decisions, which may lead their organization either to success or to failure. The given report will throw light on the aspect of literature review of the importance of financial information which will affect the decision making function of the given organizations (Cardinaels and Veen-Dirks, 2010). Different types of financial information of an organization There are different types of financial information, which reflects the flow of operations of different business organizations. These are in the form of level of cash flows, segmentation of incomes and expenses, structure of capital and nature of assets and liabilities of any modern business organization (Li, 2010). The level of cash flows interprets about the total amount of cash inflows and cash outflows of the respective business organization. The higher the level of cash flows of the organization, higher will be the liquidity level of the organization. In addition to this, if the organization has enough liquidity, then it is interpreted that the organization is successful in meeting the short-term debt on a regular basis. The structure of capital interprets about the percentage of debt and equity of the respective business firm (Altman et al. 2010). The income and expenditure statement interprets about the segmentation of level of profit of the organization. In addition to this, t he financial performance of the organization is reflected through the analysis of the balance sheet and assets and liabilities of any form of particular business organization. In addition to this, if the organization is a public limited organization, then, the different sorts of financial information can be reflected through the analysis of stock prices of the respective business organization. The percentage of dividend given to the shareholders can also be considered as financial information of the respective business organization (Kober et al. 2010). Decision making through the analysis of financial information Various forms of decision-making process can be interpreted through the analysis of financial information. For example, the cash flow statement of the organization, the management of the organization can easily take financial decisions in terms of maintaining liquid cash of the organization. With the assist of income and expenditure statement, the top-level managers of the organization will be able to know which portion of the expenses is on the higher side and portion of the expenses are on the lower side. This will further assist the managers of the organization to identify the potential weaknesses of the organization and they can take appropriate steps to minimize the variances in their respective financial performance (Merig and Gil-Lafuente, 2010). With the help of the capital structure of the organization, the managers can take appropriate steps in accordance to their cost of capital associated with the firm. The managers can easily adjust the capital structure of the firm as p er the aims and objectives of the organization. If the current business situation demands a higher portion of equity, then, the managers will incur more sources of funds in terms of equity. If the situation demands a higher portion of debts, then, the management of the organization will opt for debt source of funds (Schniederjans et al. 2010). Apart from this, financial ratios will also reflect the decision making purpose of the respective top-level managers. For example, the liquidity and financial ratios of the organization highlights the business security of the firm. On the other hand, efficiency, investment and profitability ratios reflect about the efficiency pattern of the firm. If, liquidity ratio of the firm is on the lower side, then, the managers can take appropriate steps, to improve the liquidity nature of the firm (Smith et al. 2010). The same thing happens in case of other financial ratios of the firm. All the financial ratios will the managers to forecast the future activities of an organization effectively. Similarly, with the help of stock prices, the managers can take decisions in terms of declaration of dividends, additional shares or bonus shares to the respective shareholders or investors of the business organization. This is the reason why financial information regarding the stock prices of the firm is of great essence for the managers to determine the success of the firms. The effectiveness of decision making of the managers of the firm will determine the success and failure success of the respective firm (Ladbury et al. 2010). If it is seen that the managers have taken a wrong decision in terms of financial behavior, then, that particular firm will not succeed in the end. Therefore, it can be inferred that financial information has an effective impact on the decision-making process of the managers of business organizations. The higher the effectiveness of decision process of the managers , the more effective will be the success of the organization in terms of its competitors. Challenges faced by the managers to procure effective financial information for decision making There are multiple challenges faced by the managers of the organization in order to procure financial information for their decision-making. In real terms, financial information can be procured through collection of data and preparing the respective financial statements after analysis of the data. It has been often seen that there are several errors in case of procurement and recording of information of different financial statements. If the information procured and recorded do not reflect the true picture of the business, then, it will be very difficult for the managers to implement decisions in a strategic manner (Schniederjans et al. 2010). It is of great challenge for the managers to procure and analyze all the financial information effectively. Apart from this, if the organization manipulates their respective financial data, then, the managers may take ineffective decisions that will further hamper the growth or success of the respective organizations (Cardinaels and Veen-Dirks, 2010). Therefore, it is of great essence for the managers to procure true picture of the firm and take steps in accordance to that. Conclusion The above report concludes financial information has a major impact on the decisions made by various organizations. It also determines the success and failures of the firm. A manager needs to minimize the respective challenges in order to procure and analyze the respective decision. Reference list Cardinaels, E., and van Veen-Dirks, P. M. (2010). Financial versus non-financial information: The impact of information organization and presentation in a Balanced Scorecard.Accounting, Organizations and Society,35(6), 565-578. Li, S. (2010). Does mandatory adoption of International Financial Reporting Standards in the European Union reduce the cost of equity capital?.The Accounting Review,85(2), 607-636. Altman, E. I., Sabato, G., and Wilson, N. (2010). The value of non-financial information in small and medium-sized enterprise risk management.The Journal of Credit Risk,6(2), 1-33. Kober, R., Lee, J., and Ng, J. (2010). Mind your accruals: perceived usefulness of financial information in the Australian public sector under different accounting systems.Financial Accountability and Management,26(3), 267-298. Merig, J. M., and Gil-Lafuente, A. M. (2010). New decision-making techniques and their application in the selection of financial products.Information Sciences,180(11), 2085-2094. Schniederjans, M. J., Hamaker, J. L., and Schniederjans, A. M. (2010).Information technology investment: Decision-making methodology. World Scientific. Smith, J. P., McArdle, J. J., and Willis, R. (2010). 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