ACCOUNTANTS AND FINANCIAL MANAGERS

Accountants and Financial Managers

1. How do accountants and financial managers differ in their use of financial information? Why is cash flow more significant to a financial manager than it is to an accountant?

To a large extent, accountants make use of financial information to report financial transactions that have happened in the past. On the other hand, financial managers use financial information to make plans about future undertakings of relevance to the organization. Cash flow happens to be more relevant to a financial manager owing to the fact that as Moyer, McGuigan and Rao (2012) indicate, a cash flow statement could come in handy in budgeting efforts as it is instrumental in the prediction of future cash flow. As the authors further indicate, a cash flow statement is avaluable measureof strength, profitability, and the long-term future outlook of a company (Moyer, McGuigan and Rao, 2012, p. 216).

2. Explain how financial planning is used to determine a firms external financing requirements.

Financial...

Considerations relating to risk and return as well as cost of capital happen to be in the purview of financial planning. Thus, for instance,...…to the break-even point if the contribution margin rises (falls)?

Knowledge about break-even point is crucial in long-term planning efforts. This is more so the case given that it helps in the establishment of that point at which an enterprise or new venture will turn a profit i.e. the point at which the total cost of production will be covered by total revenue from sales (Brigham and Houston, 2012). A rise in the contribution margin would result in a decrease in the break-even point. On the other hand, a fall in the contribution margin would result in an increase in the…