Why Is Accounting Important? Making Corporate Decisions

May 19th, 2015
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Oregon State University
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Suppose a telecom company is looking to acquire a regional company to boost its presence in that region. There are several potential targets that fit the bill. How does this company determine which of these targets, if any, would make a good acquisition candidate?

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INTRODUCTIONWhat Is Accounting?Accounting is the language of business. It is a standard set of rules for measuring afirms financial performance. Assessing a companys financial performance is importantfor many groups, including: The firms officers (managers and employees) Investors (current and potential shareholders) Lenders (banks) General publicStandard financial statements serve as a yardstick of communicating financialperformance to the general public.For example, monthly sales volumes released by McDonalds Corp. provide bothits managers and the general public with an opportunity to assess the companysfinancial performance across major geographic segments.Why Is Accounting Important?Making Corporate DecisionsSuppose a telecom company is looking to acquire a regional company to boost itspresence in that region. There are several potential targets that fit the bill. How doesthis company determine which of these targets, if any, would make a good acquisitioncandidate?Making Investment DecisionsA mutual fund is looking to invest in several diverse technology companiesMicrosoft, Oracle, and Intel. How does this mutual fund determine in which of thesetargets it should make an investment?Accounting Facilitates Corporate and Investment DecisionsA major part of corporate and investment decisions relies on analyzing all of thecompanies financial information in the above-mentioned cases. Accounting, thestandard languag

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