Accounting allows a company to work with measurements of cost, risk and performance which play a major role in identifying strategic challenges in your organization and designing proper actionable policies to work with. This understanding of numbers and the vision of an organization facilitates value creation and company strategy.
A good example is when the Financial Stability Board proposed more closed-ended funds to assist with liquidity mismatch. According to FSB, traditional asset management has not realized financial stability which means risks are increasing. However, the agency pointed out that closed-ended funds in global assets have been on the rise in the past decade from $50 Trillion in 2004 to $76 Trillion today. This amounts to 40% of the global financial system assets hence the proposed changes.
The example highlights how taking account of financial growth is changing how FSB is looking at asset management, and in particular closed-ended funds.
Tasman-Jones, Jessica. “FSB Backs Closed-Ended Funds in Liquidity Recommendations – Fund Strategy”. Fund Strategy. N.p., 2017. Web. 14 Jan. 2017
PLEASE ANSWER THIS QUESTION.
When you consider there are many financial ratios that derive their information from the financial statements. Which financial ratios can capture the risks facing the business? On what basis did you choose your financial ratios?