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
There are other contingent factors mentioned in the introduction which are difficult to represent on a financial report, yet are perhaps vital in determining the success of business performance. Strategy in making decisions can be very important for a business. All companies have what is known as 'corporate objectives.' 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). All companies have these objectives, which proves that management DO think long-term when formulating plans for future economic developments. However, there is often a separation of departments within a company into the finance, marketing and production. These three departments all have differing corporate objectives, some of which are focused on in the short-term, and others in the long-term. For example, the finance department will aim to just survive initially which could be seen as a short-term objective. They would then perhaps target a debt-free balance sheet, which is more long-term. The marketing department in the short-term may well focus on increasing market share! , but in the long-term may wish to overtake a competitor. These examples prove that management need to achieve the short-term before they can even consider the long-term goals. They then have a firm structure on which to base their strategic decisions upon. educing wage levels or increasing productivity. This is an example whereby the financial report, with the use of valuable info
Some common words found in the essay are:
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Approximate Word count = 1057
Approximate Pages = 4 (250 words per page double spaced)
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