Sample Cheat Sheets: : Finance And Accounting Strategy: The Use of Accounting Data To Enable Strategic Decision Making

Accounting Data & Strategy

• Purpose: Provides objective, financial evidence for long-term planning.
• Key uses: Assess profitability, liquidity, efficiency, solvency, trends, risks, and resource allocation.

Financial Statements in Strategy

• Income statement (Profit & Loss)
  • Shows revenues, costs, and profits.
  • Strategic use: Analyse margins, identify cost structures, benchmark against competitors.
  • Guides: Pricing, cost reduction, diversification.
• Balance sheet (Statement of Financial Position)
  • Shows assets, liabilities, and equity at a point in time.
  • Strategic use: Assess liquidity, solvency, gearing ratio.
  • Guides: Debt vs equity financing, expansion feasibility.
• Cash flow statement
  • Shows inflows and outflows of cash.
  • Strategic use: Manage liquidity, plan dividends, capital expenditure.
  • Guides: Borrowing needs, working capital management.
• Management accounts & ratios
  • Break down performance by product/region.
  • Ratios:
    • Profitability → ROCE, net margin
    • Liquidity → Current ratio, acid test
    • Efficiency → Inventory turnover, debtor days
  • Guides: Investment, credit control, operational efficiency.

Annual Report Contents

• Financial statements – Core financial health.
• Auditor’s report – Independent accuracy check.
• Directors’ report – Strategy, dividends, governance.
• Chairman’s statement – Vision, performance summary.
• Corporate governance – Board, compliance, risk control.
• Notes to the accounts – Policies, assumptions, breakdowns.
• CSR / Sustainability report – Ethical, social, environmental actions.
• Five-year summary – Long-term performance trends.

Usefulness to Stakeholders

• Investors: Profitability, dividends, growth potential.
• Creditors/Banks: Solvency, repayment ability.
• Employees: Job security, company performance.
• Government: Compliance, tax, regulation.
• Community/Public: CSR and sustainability.
• Management: Strategy review, benchmarking.

Strategic Applications

• Investment strategy – Expansion, acquisitions.
• Financing strategy – Debt vs equity, gearing considerations.
• Dividend policy – Based on cash flow and profits.
• Growth strategy – Integration, market expansion.
• Turnaround strategy – Cost-cutting, restructuring.

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