Cuttington University

Suakoko District, Bong County

Republic of Liberia

College of Business & Public Administration

Course Title: Advance Financial Management

Submitted To: Dr. P. Padolo Moye

Lecturer

Submitted By: Mercy L. Cooper

Student
ID#: 218574

Date of Submission: April 10, 2023

Introduction
Accurate information can enable an organization to make good decisions (Butanes,
2018). A suitable accounting system provides necessary information needed to make
strategic decisions. An organization that maintains accurate financial data can analyze the
data and use it as a basis for key decisions such as hiring decisions, decisions to increase
production and much more.

Budgeting is key to the success of an organization. The channels in which investments

are done can be the difference between a successful organization and one which is not
successful. Financial records play a huge role in budgeting because the inform budget
allocation decisions. Historical financial data informs projections and business trends.
Research has shown that financial data is most appropriate when given in terms of well-
structured accounting processes.

Accounting helps communicate results to different stakeholders (Kimmel et al., 2018).

Some of the users of accounting information includes lenders, investors and creditors.
Investors may use the accounting information to inform their decisions to buy
organizational shares. Lenders will also use the accounting information to evaluate risks
and determine if lending to the organization is an appropriate decision. Organizations
have to ensure credibility with external consumers of accounting information through
coming up with reliable accounting information which is relevant to their needs.
 1. A Collage Accounting’s professor was explaining a particularly
complicated concept of Profit and Loss statements to his class one day
when a Semester II Freshmen student interrupted him, saying “why do
we have to have to learn this stuff? The student asked.
“To save lives”, replied the professor. The student thought for a
moment and then asked, “So how does Accounting save lives?
Please answer the last question in four pages using practical example.

Accounting plays an important role in businesses and personal life. Accounting

information can be used to inform business decisions that can influence the success of a
business and an individual. By keeping financial records accurate and updated, it can
enhance financial health for individuals and businesses.

Helps in evaluating business performance

Accounting plays a vital role in business because it enable a person and a business entity
to keep track of expenses. Accounting can enable managers evaluate the performance of a
business. According to Kimmel et al. (2018), accounting keeps a record of the
organization’s financial information. With comprehensive consistent and accurate
records, users of the accounting information can evaluate the performance of the
organization over time. By use of an accounting records, it is possible to understand what
is happening in the business financially. It can help track expenses, gross margin, debt
and can be a framework for comparison of current data in an organization with previous
accounting records. This can enable a business to allocate funds appropriately such that it
stimulates the economic performance of an organization.

Enhances an organization’s decision-making

Accurate information can enable an organization to make good decisions (Butenas,

2018). A suitable accounting system provides necessary information needed to make
strategic decisions. An organization that maintains accurate financial data can analyze the
data and use it as a basis for key decisions such as hiring decisions, decisions to increase
production and much more.

Can help create a budget and future projections

Budgeting is key to the success of an organization. The channels in which investments

are done can be the difference between a successful organization and one which is not
successful. Financial records play a huge role in budgeting because the inform budget
allocation decisions. Historical financial data informs projections and business trends.
Research has shown that financial data is most appropriate when given in terms of well-
structured accounting processes.

Communicates results

Accounting helps communicate results to different stakeholders (Kimmel et al., 2018).

Some of the users of accounting information includes lenders, investors and creditors.
Investors may use the accounting information to inform their decisions to buy
organizational shares. Lenders will also use the accounting information to evaluate risks
and determine if lending to the organization is an appropriate decision. Organizations
have to ensure credibility with external consumers of accounting information through
coming up with reliable accounting information which is relevant to their needs.

Meet legal requirements

Proper accounting can enable an organization to ensure they report liabilities and assets
accurately. There are many laws that have been put in place to guide the conduct of
businesses and ensure fair competition in the market. Tax authorities’ leverage
standardized accounting statements to evaluate an organization’s declared net income and
gross revenue. The accounting system can go a long way to ensure organizations report
their finances accurately and legally.

Helps in filling financial statements

Businesses are required by the law to file their financial statements each trading period
with the Registrar of Companies. Listed companies have to file their returns with stock
exchange. This is for tax filing processes. It is very evident that accounting plays a very
important role in those situations.

Although the application of accounting is more evident for businesses, it is also essential
in personal life. Most people consider accounting the language of businesses but fail to
acknowledge how important and applicable it is in daily life. By use of accounting,
people can be able to organize their finances to remain financially healthy (Butanes,
2018). People use accounting unconsciously in their lives in many ways such as
managing their expenditure and budgeting. In addition to those, people can use
accounting to record their sources of expenditure. For instance, they can record the
amount of money they made each month ordering it by source and amount. At the end of
the month, a person can tell how much expenses they incurred that month and put
measures to save money or earn more for the following month. This is just one of the
many ways people can make their finances more efficient and effective. Apart from that,
individuals can make financial reports in form of cash flows to evaluate their finances.
Although this is a simple process, it is very efficient in evaluating a person’s financial
position.

Accounting can also enable people to handle huge amounts of money and debt. Personal
taxes are usually very complicated. It is very tricky for self-employed people to manage
taxes. Some of the basic decisions such as giving financial gifts of getting an inheritance
can make financial reporting tricky. Accounting can enable people to handle such
decisions in a better manner. It can also save people time and improve their decision-
making skills.

I will use the knowledge I gained in Acctg.100 on my personal life by making financial
reports to evaluate my finances. By use of the financial reports, I will be able to identify
expenses that are less important and find a way to minimize them. I will channel these
funds into more important expenses, preferably those that can earn me revenue. I will use
the accounting knowledge to plan my finances and ensure that in the next period, I have
healthy finances. Since at this time I do not have any stable source of income, I will
leverage the accounting knowledge to spend my money more efficiently based on my
needs.

I will also use the accounting knowledge gained from Acctg.100 to plan for my financial
future. I will evaluate my historical financial information to predict my current and future
business and financial position. I will make financial reports that comprise of statements
of change of an equity, balance sheets and cash flows. By evaluating my historical
financial position, I will be able to predict and present my financial performance in terms
of financial reports. I will also be able to identify areas where I experienced challenges in
the transactions. After identifying the difficulties, I will be able to solve them to enable
myself to have a healthier financial life.

I will also use the accounting knowledge I gained from the course to focus on money
management finances. Money management is ideal for financial health. Human needs are
unlimited and resourced available to satisfy the needs are scarce. Accounting knowledge
is essential in enabling a person to prioritize their needs and allocate a budget that can
meet the needs. Apart from that, as a student, I will apply the accounting knowledge as a
foundation for my career development. I have always been passionate about accounting
and would like to make a career out of the field someday. I have learned that he chances
for a skilled accounting practitioner are unlimited and would like to go up the ladder and
become a successful accountant someday.
Everyone wants an accountant’s help when tax season strikes. Few people, however,
know the kind of value accountants can add outside of the systematic and detailed
recording of financial transactions. Accountants can assist SMEs in numerous ways that
will help their businesses grow into thriving, compliant entities.

This is because today’s accountants are much more than just number crunchers; they’re
also leaders, strategists, technologists, advisors, and business specialists. Before
discussing the value of some of these roles, we need to define ‘value’ in a business
context.

What is value?

Value is created and maintained through tactical choices and strategic investments into
the right resources and relationships to create and improve assets and competitive
capabilities. These assets include innovations, infrastructure, people, and intellectual
property.

Achieving a robust and sustainable business model is challenging, and a broader set of
data, information, and insights is needed to provide a holistic picture of how value is
created. When adding value to a business, the factors to consider are focusing on
priorities such as the best use of cash, tax strategy, capital structure, employee
remuneration and benefits, and social and environmental outcomes.

Creating and conserving value through knowledge and creativity is how businesses
ensure longevity. An organization needs a comprehensive, precise, and workable
perspective on value to effect sustainable growth. This value creation outline helps move
the business outlook from short-term to long-term value.

This is a significant challenge for organizations. For the accounting profession, however,
it presents a unique opportunity. Accountants can bring a unique skill set that goes far
beyond just working with historical data.
2. Supposed you are looking at the following possible cash flows: year 1
CF=$2,000; years 2 and 3 CF = $2,400; years 4 and 5 CF = $3,100. The
required discount rate is 8%.
a. What is the value of the cash flows at year 5?
b. What is the value of the cash flows today?
c. What is the value of the cash flows at year 3?

PV = CF
(1+r)t
PV = 10196,1
2,108.8
2279.4
1904.7
2051.3
1851.9

2,000 2,400 2,400 3,100 3,100

a. The value of cash flows at year 5 is 2,108.8

b. The value of cash flows at today is 10196,1
c. The value of cash flows at year 3 is 1,904.7
References

Kimmel P.D., Weygandt J.J., Kieso D.E. (2018). Accounting: Tools for Business
Decision Making, John Wiley & Sons

Butenas R. (2018). The Importance of Financial Accounting Information for Business

Management, FINIZ 2018