Escolar Documentos
Profissional Documentos
Cultura Documentos
Introduction
People need economic and financial information to help
them make decisions and judgments about b usinesses.
Accounting is the process of collecting and communicating
that information to users. Such users can be i nternal to the
business; for example, employees, m anagers, and direc-
tors have access to day-to-day information and can use that
information to make d ecisions about such issues as mar-
keting, manufacturing, product mix, pricing, and so on.
Other users are external; for e xample, investors and lend-
Joel Shapiro has been an ers (both present and p rospective), g overnments and regu-
accounting instructor at Ryerson
University in Toronto, Canada for
lators, unions, insurers, the media, and so on. They do not
20 years. Previously, he developed have access to the business’s internal workings and day-to-
an accounting and inventory day results, and must rely on formal fi nancial statements,
management software system for prepared at least annually, to make decisions relating to
small businesses. In his spare time,
lending, investing, c ompliance with laws and regulations,
he enjoys working on “Kakuro” and
cryptic crossword puzzles and travels and other issues pertinent to their own interests.
throughout Ontario as a bridge This article will illustrate a number of mathematical
tournament director. relationships, or ratios, between various numbers
on a company’s financial statements. These ratios,
when properly understood in their contexts, can assist
external users to make intelligent judgments about
the company’s performance and immediate prospects.
These judgments in turn would form the basis of effec-
tive financial decisions that should benefit the users in
the future.