Fundamental concepts and techniques in accounting and finance
The field of financial management has experienced gradual but significant change during the twentieth century. During the first two decades of the century, financial managers were concerned mostly with the legal issues surrounding the issuance of stocks and bonds. This focus of attention reflected the primitive nature of the capital markets in the early 1900s, the wave of mergers and consolidations occurring at that time, and the lack of what now is considered routine full disclosure of accounting and financial information about companies offering securities to the public. With the Depression of the 1930s, the main focus of financial management shifted to the defensive aspects of business survival.
As we enter the twenty-first century, the most significant trend to impact successful corporate financial management will be the continuing globalization of business in general and financial management in particular. There is no major U.S. or foreign corporations that do business solely within the confines of their own country. The need to deal with multiple currencies, worldwide money and capital markets where investment capital moves across borders at an increasing pace facing fewer and fewer barriers, a wide variety of accounting systems and tax laws, and a multitude of political risk environments is now a normal part of the responsibilities of a corporate financial manager. This globalization of business does not change the fundamental theories of corporate financial management, but it does have a substantial impact on corporate financial practice and domestic financial markets. …
t change the fundamental theories of corporate financial management, but it does have a substantial impact on corporate financial practice and domestic financial markets.
The only thing certain about the future is that finance and industry will continue to change, offering new challenges and opportunities to financial managers. The importance of competent financial management to the success and even survival of the modern business organization cannot be overemphasized. It is no accident that presidents and board chairpersons of large, successful corporations increasingly rise to their positions by coming up the "finance side of the house" (Kaplan, 1989). In smaller business, experience has shown that the early survival of a new business and prosperity in its developing stages is strongly dependent on effective financial planning and control. The most common reason cited for the high failure rate experienced by new ventures is lack of financial expertise. Similarly, financial administration is receiving increased attention by governmental units at all levels. Financial management in all types of nonprofit corporations and organizations is also benefiting from increased attention. Competent financial planning and management are critical components of success in any organization that brings people together to achieve a common goal.
The impact of inflation and high interest rates has focused increased attention on the financial implications of nearly all business decisions. Knowledge of financial management principles and techniques has become even more important during our current era of economic uncertainty. Functional specialists in such diverse areas as marketing, production, and human resources management have environment in which the firm operates. A