"The goal of financial management is to take actions which maximize the value of a firm's stock. Those actions will eventually appear in the firm's financial statement, so a general understanding of financial statements is very important for the manager.".
Given the recent failure of many financial institutions, do you believe business leaders really understand and use all of the concepts and principles we teach in accounting, finance, and economics? In addition, do you believe financial managers are truly concerned about maximizing the value of a firm's stock? Why or why not?.
No, I don't think that most non accounting managers understand and use many much less all of the concepts and principles that is taught in accounting, finance or economics. I do however believe that this fundamental understand, at least from a theoretical perspective is very important. Understanding at least the concepts and theories of accounting can help the non accountant to maximize the utility for which financial information will to help decision makers make more informed decisions in other areas of business operations. At minimum the non-accountant manager should have a fundamental understanding of the financial statements and conclusions the information can assist with. Non-accountant managers can use this information to forecast and budget business operations, investments for growth and the financial position of the organization. There is information that is provided by the financial statements that are relevant to every stakeholder in the organization, examples include the efficacy and liquidity. It is important to know that operations are efficient and there is enough cash flow to cover debts at every level of management.
I do believe for the most part financial managers are primarily concerned with the maximizing the value of the firms stock in the right ways. This is what shareholders expect, however it should be noted that it is how managers attain maximization that is usually what sparks some controversy.
