The role of accounting statements in management decision making

In this article we will consider the role of accounting statements in the process of making managerial decisions. We will discuss what financial indicators should be analysed to assess a company’s financial health, profitability and efficiency. You will learn how to use accounting statements to make informed and strategic business decisions.

Accounting reports play an important role in management decision making in an organisation. It represents systematised information about the financial condition and performance of an enterprise, which serves as a basis for analysis and evaluation of its activities.

First of all, accounting reports allow to get a general picture of the financial position of the company. It includes the balance sheet, which reflects the assets, liabilities and equity of the company at a certain point in time, as well as the income statement, which shows the financial results of activity for a certain period of time. Analysing these reports allows you to determine the overall financial stability of the company, its solvency, degree of indebtedness, etc.

Further, accounting reports provide information about the profitability of the company. The analysis of profit and loss indicators makes it possible to assess the efficiency of the use of resources and the activities of the organisation as a whole. For example, with the help of data on profits and costs, it is possible to determine in which areas of activity the company makes the most profit, and where changes should be made to improve efficiency.

In addition, accounting reports allow you to analyse financial indicators related to liquidity, assets, working capital and other aspects of the company’s activities. This allows problem areas to be identified and action to be taken to improve them.

In order to make management decisions based on accounting statements, it is necessary to be able to interpret and analyse the data correctly. Accounting indicators should be compared with certain standards and norms, as well as compared with the results of previous periods and with the data of competitors. Such analyses help to identify trends, anomalies and problematic issues, which helps in making informed decisions.

In general, accounting statements are an important tool for managing an enterprise. It provides information about the financial condition, profitability and efficiency of the company, which helps in making informed and strategic decisions. Analysis of accounting statements data allows you to identify problem areas, determine the efficiency of resource use and develop measures to improve the financial performance of the organisation.

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