Summary
Summary Chapter 7 - Business Management 114
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Summary of 1 pages for the course Business Management 114 at SUN
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Chapter 7- Using Accounting InformationWhy is accounting information important?
Bankers, creditors, investors etc. rely on auditor’s opinion.
GAAP – generally accepted accounting principles
Who uses Accounting information?
Managers, employees, lenders and suppliers are the main users of
financial statements.
Managers and employees
Planning
Organize
Lead and motivate
Control
Lenders and suppliers
Evaluate credit application
Evaluate non-payment risk
Stockholders and Potential Investors
Evaluate financial health of firm
Evaluate investment risk
Government Agencies
Confirm tax liabilities
Confirm payroll reductions
Approve new issues of stocks and bonds
Types of accounting
o Managerial accounting – provides managers and employees
with information to make decision
o Financial Accounting – generates financial statements and
reports
Accounting equation
Assets = Liabilities + Owners Equity
Using accounting information to evaluate a potential investment
Use common sense to interpret the numbers
Financial statements should be audited by an outside source
Look for use of new strategies to reduce costs
Determine the firm’s ability to pay its debts and borrow
money in the future
Look at how the numbers relate to each other
Understand the financial ratios
Study ratios from slides
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