Respond to 2 Colleagues 1 paragraph each Discussion-Accounting

Running head: FINANCIAL ACCOUNTING AND MANAGERIAL ACCOUNTING 2

FINANCIAL ACCOUNTING AND MANAGERIAL ACCOUNTING 2

Financial Accounting and Managerial Accounting

Name

Class

Institution

Date

One decision that could be made using Financial Accounting information is the decision to invest in a company. This decision could be made by an investor after examining the company’s profitability, creditworthiness, revenue, and the company’s overall health and position (Leonard, 2019). Another decision is the decision to lend money to a company. This decision could be made by a bank or any other financial institution after examining the creditworthiness of the company. When the financial information is used accurately, decisions made will be accurate, realistic, and objective. Failure to have financial accounting information is risky. When investors don’t have Financial Accounting information, they will have less understanding of the prospective, current, and historical financial health of a business, therefore end up making wrong decisions. On the other hand, when the bank doesn’t have the Financial Accounting information, they will not get a better sense of the creditworthiness of a company, thus end up making bad decisions.

One decision that could be made using Managerial Accounting information is the buy or make decision. The other one is the decision on which product or service a company should sell (Freedman, 2019). The management can make these decisions after carefully analyzing the performance and the overall health of the entity. When the Managerial Accounting information is used accurately, management will make better decisions that can help in increasing the overall operational efficiency and effectiveness of a company. When the management doesn’t have managerial accounting information, they will not have a better understanding of the company’s performance, therefore ending up making wrong decisions for the company. Wrong decisions will affect the present and the future performance of the company.

References

Freedman, J. (2019). Why Management Accounting is Important in Decision-Making. Chron. Retrieved from: https://smallbusiness.chron.com/management-accounting-important-decisionmaking-53947.html

Leonard, K. (2019). Advantages of a Financial Statement Analysis. Chron. Retrieved from: https://smallbusiness.chron.com/advantages-financial-statement-analysis-4124.html#:~:text=When%20a%20business%20seeks%20partners,a%20reasonable%20cost%20per%20share.