The owners of the company will discuss their course of actions that need to take if the company is not performing well describe by the data of the financial report. For example, reduce expense, change cost structure.
The financial report from the company will affect at the customer side as well. Company’s reputation is a major factor in the sales end. Customer is not likely to buy their product if a company is going to bankrupt or the company is involved in a scandal. Therefore, a company must make sure they are doing well for their ethical standard and accounting compliance.
The company’s performance will affect their employee’s loyalty. If the company is performing well, they will works harder to expect bonus at the year end. In opposite, the employee spirit is down because the company won’t perform well no matter how hard they perform.
Accurate financial reporting can make a difference in the stock performance of a start-up company. Take the re-born General Motors for example. With the help of the bailout from the Federal Government, GM was able to emerge from bankruptcy by re-negotiating with its creditors and labor unions. By providing accurate information on its revenue and balance sheets, GM was able to convince the investing public that the company is back and stronger than before. Because of the confidence and demand exhibited by its investors based on the financial reporting, GM was able to price its IPO shares at $33 which well exceeded the high end of the initial offering range of $26 - $29. (GM)
On the other hand, poor communication in accounting for the decision-makers can sometimes doom the company. Enron is perhaps the best example. It was a major player in the energy industry during the 1990s led by CEO Kenneth Lay. However, a series of failed deals and projects led to a cover-up by executives of the company. Company executives hid billions of debts from the books and Arthur Andersen, the outside auditor, failed miserably in detecting any of the accounting irregularities practiced by Enron. As a result of the falsified financial reporting and criminal actions of the company executives, Enron eventually went under in what was then the largest bankruptcy in US history and it brought Arthur Andersen down with it. Many investors lost huge sums of money in Enron, with some who lost their life savings. The demise of Enron and subsequently WorldCom led to the passing of the Sarbanes-Oxley Act by Congress. Sarbanes-Oxley, or SOX for short, fundamentally changed the way corporations do business by requiring more stringent financial reporting and disclosures and, more importantly, by demanding that company auditors be independent. Some critics of Sarbanes-Oxley have cited the cost of compliance as a disadvantage for US publicly-traded corporations when competing against foreign companies. However, Sarbanes-Oxley may have ultimately prevented more Enron-like scandals by creating more corporate transparency and enhancing financial disclosures. (Bruce)
(Continue Nick’s part) government will review report at the end of the cycle, this will affect the economic activates for next year. If the government decides to tighten their economic activities with new regulations, cost, company structure and revenue will be affected.
What communication skills must be included in the university curriculum to prepare students for their future positions?
To prepare students for a successful career as a financial professional, universities must include the following communications-related courses as part of the curriculum:
- Communications Skills
Communications skills include oral, written, and presentation skills. The goal is to convey complex financial data into information that can be easily understood by the investing public. This means students must learn how to speak in plain language and avoid the frequent use of industry jargons such as beta, EBITDA, etc. Seasoned investors may understand some of these concepts, but the average or novice investors may not. If the goal is to market a company to as much of the investing public as possible, plain and simple-to-understand language may work best. Written communications skills mean the ability to transform complex financial data into easy-to-understand tables and charts. Taking into consideration human limitations in absorbing complex financial and numeric information, a successful financial professional must be able to condense such information into high-level summary that the average investor can understand as a glance. Thus, it is important that the students learn how to use charts and other visual aids to express complex financial information. Finally, communications skills include how to present information successfully to an audience. Presentation skills involve the use of appropriate eye contact and body language to engage the audience, the ability to listen to the audience, excellent command of the spoken language and voice intonation to keep the audience interested, and more. Presentation skills are crucial when conveying information to the company’s board during board meetings or to the investors during shareholder meetings.
- Relationship Management Skills
Relationship management is important to a financial professional when it comes to managing the client’s account. Successful relationship management means the ability to determine the customer’s risk appetite by probing and asking the right questions. It also means building trust and confidence with the customer so he or she is comfortable with your advice. Finally, relationship management is the ability to identify the customer’s needs and tailor the financial products accordingly. For example, is the customer investing for early retirement, college education for their children, wealth preservation and inflation protection? By using relationship management skills, a successful financial professional can anticipate the customer’s needs and gain trust from the customer.
- Marketing and Sales Skills
This is somewhat related to relationship management but goes a step further. The successful financial professional must be able to sell a product that the customer may not recognize is best for him or her. For example, a customer may be reluctant to invest in oversea stocks because he or she is not familiar with the foreign market. However, as a successful financial professional you must be able to convince the customer to maintain a balanced portfolio that includes both foreign and domestic equities. This is where the marketing and sales skills come into play. How do you overcome the customer’s skepticism in the foreign market? One way to do this may be to highlight the potential of the so-called BRIC (Brazil-Russia-India-China) emerging markets. The successful financial professional will put together recommendations based on demonstrated top performers in the BRIC markets and explain the need to portfolio diversification to take advantage of the growth in the BRIC markets.
“GM's Future IPO: Whom Can Investors Trust?” The accounting Onion. 16 August. 2010. 27 November. 2010 <http://accountingonion.typepad.com/theaccountingonion/2010/08/gms-ipo-whom-can-investors-trust.html>
Williams, Jan R., Haka, Susan F., Bettner, Mark S. and Meigs, Robert F. “Accounting for Decision Making.” Financial and Managerial Accounting: The Basis for Business Decisions, 12/e. Mc Graw Hill, 2002
Bruce Nussbaum. “Can You Trust Anybody Anymore?” Bloomberg Business Week 28 January. 2002. 27 November. 2010 <http://www.businessweek.com/magazine/content/02_04/b3767701.htm>
