Finance and accounting strategy
| English | Chinese | Pinyin |
|---|---|---|
| strategic decisions | 战略决策 | zhàn lüè jué cè |
| qualitative | 定性 | dìng xìng |
| profitability | 盈利能力 | yíng lì néng lì |
| liquidity | 流动性 | liú dòng xìng |
| ROCE | 已动用资本回报率 | yǐ dòng yòng zī běn huí bào lǜ |
| gearing | 杠杆比率 | gàng gǎn bǐ lǜ |
| window-dressed | 粉饰报表 | fěn shì bào biǎo |
Turning numbers into decisions
- Statements and ratios are only useful if they change what a business does.
- The final skill is using financial information to make better strategic decisions 战略决策.
Sources of finance lab
Choose the best type of finance by time, risk and ownership.
To interpret a ratio, it is most useful to compare it with:
Ratios mean little without comparison.
Using accounts and ratios
- Compare ratios over time (trends), against competitors, and against targets.
- Combine financial data with the qualitative 定性 picture — market, staff, brand.
Financial statements and ratios let stakeholders judge a firm's performance
Which decisions can financial analysis inform? (Select all that apply.)
Financial data guides product, investment and funding choices.
Financial decisions
- Which products to keep or drop; whether to invest or expand; how to fund it (debt vs equity).
- Good decisions balance profitability 盈利能力, liquidity 流动性 and risk.
Worked example. A firm's ROCE 已动用资本回报率 is falling and gearing 杠杆比率 is rising. The accounts point to cutting back on borrowing and focusing on its most profitable products — a strategy driven by the numbers.
Manipulating accounts to look more favourable than reality is called:
Window dressing flatters the figures.
Financial data should be weighed alongside qualitative factors, not used alone.
Numbers inform decisions but are only part of the picture.
A key limitation of accounts is that they are ______, looking at the past rather than the future.
Accounts record what already happened.
The limits of financial data
- Accounts can be window-dressed 粉饰报表 to look better than reality.
- They are historic and ignore the future, ethics and stakeholder effects.
Numbers inform decisions; they don't make them. Financial data is essential but partial. Good managers weigh it alongside market conditions, people and ethics — not in isolation.
You've got it
- use ratios over time, vs competitors, and vs targets — and add the qualitative picture
- financial data guides product, investment and funding decisions
- accounts can be window-dressed and are historic — numbers inform, they don't decide