Businesses need information for evaluating performance, for establishing goals, and for developing plans to meet goals. Managers need timely and detailed information for evaluating performance and implementing plans. They need very timely and detailed information for day-to-day decisions to achieve company goals. The value of information and who exactly uses it will be discussed so that the company can realize that the effectiveness of strategic decision-making is all based on suitable information. In this essay, information will be provided show how studying accounting helps a non-accountant.



Obviously an accountant requires valuable information to construct the report. Valuable information is that which "may cause a change in any planned course of action". The valuable information which can be represented on a balance sheet, such as profitability levels, will affect strategic decision-making. So of course, financial reports can help formulate decisions also. The purpose of the balance sheet is just to set out the financial position of a business at a particular moment in time. From this, strategic decisions regarding future performance can be formulated. A financial report will always centre on accounting. This can be defined as the process of identifying, measuring and communicating economic information to permit informed judgments and decisions, by users of the information. If we just put aside the fact that there are these contingent factors that cannot necessarily be represented on a financial report, we can still see that information is vital. Mangers determine whether the decision-making is ideally short or long-term. In the short-term, a manager is looking for a profit and a healthy balance sheet. The strategic vision of stability and growth would come in the longer-term. All companies have these objectives, which prove that management DOES 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 needs 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. If a firm just relies upon assessing financial reports to make decisions, what would the management be leaving out?

Well, according to Emmanuel and Otley (1985) "a firms' ultimate survival is determined by the degree in which it adapts and accommodates itself to environmental contingencies" (Accounting in a Business Context, page 222). When referring to the environment, this does not necessarily mean the surrounding trees and woodlands per se, but more a focus on the competitive environment within the market being produced. The degree of competition a company faces will severely affect the firms' strategic decision-making. If a rival company is selling goods at a lower price because they are producing more efficiently, the chances are the rival company will experience higher demand (this is assumed through use of the demand curve theory that as prices fall, demand rises.) This will affect the other company's sales, therefore cash and very likely, profitability will fall. It could be seen as a disadvantage to be a public limited company in one way, as they are required to publish a financial statement to the public, yearly. Sales, revenue and profitability have to be stated, as well as wage costs and any other business activity. A rival company can then assess their competitor's performance and learn from that. In this way, publication of financial reports can adversely affect other firm's strategic decision-making. A company that can learn how a rival is performing will be likely to altar their approach in response to what they've seen. For example, if they can see the rival is producing more efficiently and are spending less on raw materials but producing the same amount of goods, they could alter their production methods and increase their efficiency. This may affect the company who has produced the statement by way of falling demand - unless they, in turn, alter their objectives and strategically change their plans.