The Effect of Financial Statement in Decision Making

Topics: Decision making, Financial statements, Balance sheet Pages: 3 (882 words) Published: September 3, 2012
The Effect of Financial Statement in Decision Making
Background of the Study
In every organization, every fiber of decision is important. However, before creating such valuable decision, it is also important that the decision makers such as leaders has basis. In terms of performance in an organization and creating new business ventures, it is emphasized that the use of financial statements or financial reports can be a great source of crafting decision. Through the income statement, balance sheet, statement of owner’s equity, and cash-flows, a manager or business leader can analyze the figures in a more convenient way, in which the entire organization can understand. Through examining the possible reason for changes, a leader can definitely come up in another bright kind of idea. Problem Statement

Based on the provided background in the study, there are two problems identified. ·         First, in what ways do the financial statement really help an organization in decision making? ·         Second, do all decision making process is based on the accounting principle? What is the success rate in using the financial statements in an organization? Research Aim and Objectives

The main aim of the study is to investigate the relationship of the financial statements in creating decisions in the organization and describe its effect in the process of making decisions. In order to achieve this goal, there are four objectives that needed to be addressed in the study that can help the progress of investigation. First is to describe the elements within the financial statement in relation to the process of decision making. Second is to identify the advantages and disadvantages of using the financial statement in crafting decisions such as launching a new strategy. Third is to demonstrate the relative effects of financial statements in influencing the changes in both internal and external business environment. And fourth is to measure the effectiveness of financial...

References: Ibicioglu, H., Kocabiyik, T., & Dalgar, H., (2010) Financial Statement Utilization during Decision Making Process in SMEs: A Comparative Study on European and Turkish Managers, Accessed 12 November 2010, from
Juma’h, A.H., (2009) The Implications of Materiality Concept on Accounting Practices and Decision Making, Inter Metro Business Journal, 5(1): 22, Accessed 12 November 2010, from
Walter, C., & Fortin, H., (2004) Report on the Observance of Standards and Codes (ROSC) Chile – Accounting and Auditing, Accessed 12 November 2010, from
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