4.11: Why It Matters- Financial Statements of Business Organizations
Why learn to understand financial statements of business organizations?
Understanding the relationship among all of the financial transactions of a business is key to a manager’s ability to use financial information as a decision making tool. Like the parts of an automobile engine, individual pieces of accounting information work together to create a picture of a company’s financial health. Imagine you are the manager of a small business and need to go to the bank for a business loan. The first thing your banker will ask to see are your financial statements—the report card for your business’s financial performance. Understanding the relationship among accounts, transactions and financial statements is one of the critical success factors in either owning or managing any business operation.