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Business Fundamentals for Engineering Managers by C.M. Chang

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Chapter 3

Financial Accounting and Analysis

3.1 Introduction

Financial accounting and analysis serve the important corporate functions of reporting and evaluating the financial health of a firm.1 Financial statements are prepared by certified management accountants (CMAs) and certified public accountants (CPAs), according to the Generally Accepted Accounting Principles (GAAP) in a conservative, material, and consistent manner. These financial documents provide (a) internal reporting to corporate insiders for planning and controlling routine operations and for decisions on capital investments, and (b) external reporting to shareholders and potential investors in financial markets.2 The financial performance of a company always garners a lot ...

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