Strategic Finance/Accounting Issues

Several finance/accounting concepts central to strategy implementation are acquiring needed capi­tal, developing projected financial statements, preparing financial budgets, and evaluating the worth of a business. Some examples of decisions that may require finance and accounting policies are:

1. To raise capital with short-term debt, long-term debt, preferred stock, or common stock
2. To lease or buy fixed assets
3. To determine an appropriate dividend payout ratio
4. To use last-in, first-out (LIFO), first-in, first-out (FIFO), or a market-value accounting approach
5. To extend the time of accounts receivable
6. To establish a certain percentage discount on accounts within a specified period of time
7. To determine the amount of cash that should be kept on hand

Five especially important finance/accounting activities central to strategy implementation are listed below and then discussed:

1. Acquire needed capital to implement strategies; perform EPS/EBIT analysis
2. Develop projected financial statements to show expected impact of strategies implemented
3. Determine the firm’s value (corporate valuation) in the event an offer is received
4. Decide whether to go public with an Initial Public Offering (IPO)
5. Decide whether to keep cash offshore that was earned offshore

Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).