Why should technical professionals be familiar with the basic three accounting statements: Income Statements, Balance Sheets, and Statements of Cash Flow?
Among many good answers is this:
They can answer for themselves many key questions in making financial recommendations.
For example, is a particular cost when installing a new capital project subject to income taxes or not? If the cost is booked directly to the income statement, like increased maintenance expense, it is an income tax reduction. Therefore, the maintenance expenses on a manager’s budget are REDUCED by about 40% (the marginal tax rate) leaving only about 60% for the shareholder to pay as a cash outflow.
In the case of the spare parts for the same project, those expenditures are booked to inventory on the balance sheet and do not get included in the income tax calculation. Therefore, the entire cost of spares is a cash outflow, not 60% of them.
Once again, the Biz Bucks Guy recommends you further your business education to succeed in your endeavors. You should take a basic accounting course, at the very least, so you can learn and understand these three accounting statements and become familiar the language of business. Once you learn the basics of accounting, you can answer for yourself the key questions you may have when making a financial recommendation without relying on the knowledge of others to answer those questions for you.
An accounting course will teach you what each of the three accounting statements (Income Statements, Balance Sheets, & Statements of Cash Flows) are, what data is used to create the statements, and how to interpret what the statements are telling you about your business or company. Taking a basic accounting class like our BBO Accounting 1 and Accounting 2 courses will give you a strong foundation in business. With that foundation, you will understand the complicated language of business.
And if you really want to understand how businesses work, then learn the basics in Statistics, Finance, and Economics too!