Walgreens Co. is Sick
Walgreen Co. www.walgreen.com is a nationwide store
chain and has over 3,000 stores and pharmacies and is a retail store phenomenon
and has over 27 years of record crumbling sales. Wow what’s the secret
Walgreen? Why are you so successful?
Well, customers like their high class customer service, their huge
selection, and quality products. Some
investment and other companies with a financial interest in Walgreen look at
the past success of the company and evaluate its financial management. The companies that are interested will be
seen in the Financial Highlights from the company’s annual report. Net sales,
total assets, net earnings, and stock holder’s equity are all terms that are
used to measure the financial stake of the company. It’s nice that you see the large increase in
Wal Green over the years, but what exactly does that mean? What financial
knowledge is required of those who manage Wal Green and what methods do they
use to measure Wal Green to other large companies? Wal green’s managers most be very skilled in
accounting to help maintain the financial stake of the company. However,
Walgreen’ managers are not the only ones that need to be skilled in accounting.
The people who have some type of financial stake in the business such as
owners, investors, attorneys, employees, and creditors must also be skilled in
accounting so they can analyze the financial achievement of the company. Anyone
who is interested in any one of theses roles will require some knowledge in
accounting knowledge and processes.
That’s what the purpose of accounting is. Contemporary accountants focus
on the needs of decisions in accounting information, whether these decisions are
internal or external to the business.
Accounting can be defined as a systematic information system that
measures, process, and produce financial information about an economic matter
such as a business or a government organization. Accounting serves as a connection between
business activities because it records information. First, accounting analyzes business activity
by recording data for them that they can use in the future. Second, the data is
not used until it is needed and retrieved when the time is appropriate. Last,
the information is analyzed and communicated through reports to the decision
makers. One might assume that the data
about business activities are the input and the information for decision makers
are the output. A business is an
economic entity that sells goods or services to customers at prices that will
provide a return to the owners. Here is
a list of well branded business that sell goods:
General Mills Inc. www.generalmills.com sells food
products.
Hilton Hotels Corp. www.hilton.com sells resorts and hotels
services.
EBay Inc. www.ebay.com offers an online bidding service.
Despite their differences in the
products they sell they actually have a lot in common. Each business must have enough money for the
cost of doing business but still have adequate money left over. If the cost of
business costs more than operating the business, than that’s when a business
will start to crumble. The need to earn
money to hold an investment capital is known as profitability. However, a
business must meet the goal of liquidity.
Liquidity refers to having the money available to pay off debts when
they are due. For example, a real estate company must meet the goal of
profitability by leasing as many houses as they can, but they also must meet
the criteria of liquidity when customers don’t come up with the capital to pay
sometimes. Both of these goals must be
aced by a company to be successful in their ventures. All businesses try to pursue their goals by
engaging in these similar activities. First, businesses much start some
financial activities in order to get enough funds or capital so they can
continue their operating. Financial
activities include receiving capital from creditors such as banks and other
suppliers. On the other hand they also
include paying creditors back. Second, each business must participate in what
is known as investing activities. This refers to the productive spending of
capital so that it will help a business attain their goals in an orderly
manner. Some examples of investing
activities include purchasing land, equipment that the business may need, and
buying buildings. These resources are then sold or discarded of when they are
no longer needed. Third, another
essential of every business is participating in operating activities. Besides
selling goods and services to customers, operating activities include hiring
managers, workers, and purchasing goods and services, and paying back taxes to
the government. An extremely crucial
function of accounting is to provide performance measures. This refers to the
measures of a business that indicates whether managers are achieving or losing
their business goals, which helps to determine if a particular business is
under good management. It is crucial for
the performance to measure up with the goals of a business. For a quick example, earned income is a
measurement of profitability, and cash flow is the measurement of liquidity,
pretty simple right? Since most managers are evaluated by whether certain aimed
goals are accomplished, they must have a very sound understanding of
accounting. Since managers will try to
achieve these goals they must be motivated so that they can perform in the best
interest of a business. The typical
accounting role of helping decision makers by processing, and communicating
information effectively is furthermore divided into the subcategories of
financial accounting and management accounting.
Financial accounting is used for generating reports and communicating
between outside decisions makers to analyze how well the business is performing. The reports to the outside users are known as
the financial statements. Companies who
stocks are up for grabs on the New York Stock Exchange send their financial
statements to its owners or shareholders, and several of other creditors. The financial statements reflect the goals of
profitability and liability, and are used heavily by every person involved with
the business. If you have ANY type of
business, it is crucial for you to be literate in financial statements. They are the back and bone of accounting.
Now, let’s not get some terminology mixed up with each other. It’s critical to distinguish the system of
accounting from the ways that information is processed such as bookkeeping, and
some type of information management system.
It’s only a small part of accounting, but it is a very important
method. The major goals of accounting
are to analyze and interpret information.
The computer is also an important tool in accounting and is used to
retrieve and organize information in great time and accuracy. However, people may assume that the computer
does all the work for the accountant, but that couldn’t be more farther from
the truth. The truth is, the computer is
instructed what to do by the accountant and the main use of computers is to process
complicated information. Since computers
are so beneficial and widespread many business use computers as a management
information system. This is a system of
connected subsystems that provide the necessary information to run a business. The accounting information system is without
a doubt the most important subsystem used because it is the key role in
analyzing and managing the flow of financial data of a business.
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