Accounting and Finance Essay

1542 Words 7 Pages
Abstract
A largely accepted language is required for a business or organization to effectively communicate its results and position to stakeholders, which is why accounting has come to be known as the "language of business". Accounting is really the means for providing financial information to others. Financial analyst then take the data the accountants have compiled in the form of reports, and make educated guesses at what their company should do next. David ballast (1996) stated, "The fact remains that accounting and finance are the primary tools for reducing business problems and opportunities to a common denominator, setting goals, measuring results, and making decisions." (p. 1)
Accounting & Finance
Distinguishing between
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Finance is defined as the "management of money, banking, investments, and credit" (The American Heritage Dictionary, 2004). It manages the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects (Wikipedia 2, 2005).
Brealy, Myers, and Marcus (2004) suggest, "Financial decisions are rarely cut and dried, and the financial markets in which companies operate are changing rapidly" (p. VII). However, Donald MacKenzie (2004) suggests, "over the last fifty years, the academic study of finance has been transformed from a largely descriptive, non-mathematical enterprise to a highly analytical one in which sophisticated mathematics is deployed" (p. 4).

Balance Sheets & Income Statements
In order to make informed business decisions one must be able to understand the financial statements of a business. Two of the financial statements that one needs to know and understand are the balance sheet and the income statement. This section of the paper will analyze these two financial statements and their relationship to each other.
According to Marshal…