Question

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?

Answer 1

Financial information consists of Key Perfomance Indicators, Stock Performance with Industrial Indexes, P/E Ratio Graph bars, Financial Statements like Income Statement Consolidated, Balance Sheet Consolidated, Cash flow Consolidated and Ratio Analysis over all the financial Statements etc. This information is used differently in between the accountants and financial managers.

Accountants use the above mentioned information to identify whether the trades reflecting throughout the financial statements or not. When they audit they'd make sure to see what accounting system that has been followed and they'll check the accounting principles used. They'll make use of revenue system used whether cash or accrual system followed by the company.

Financial Managers look into the valuation of firm and evaluates the fundamentals of the balance sheet. They're more concerned about raising the debt in case of expanding a business, so they'd either go for debt restructuring or opt for raising an IPO. All these financial decision could be made only by performing analysis over the available financial information by the company.

Free cash flow to the firm and equity gives an idea of performance and future forecast insights to the financial managers where they'd have to think of many things aligned with the business interests. Whereas accountants don't have to estimate the forecasts by assuming growth rate and prepare DCF but just assure if the financial statements are well reconciled to each other and reflects the best of an accounting system.