{"id":1086,"date":"2015-05-09T20:55:29","date_gmt":"2015-05-09T20:55:29","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterybusiness1xngcxmaster\/?post_type=chapter&#038;p=1086"},"modified":"2019-01-16T23:45:00","modified_gmt":"2019-01-16T23:45:00","slug":"why-it-matters-15","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/chapter\/why-it-matters-15\/","title":{"raw":"Why It Matters: Accounting and Finance","rendered":"Why It Matters: Accounting and Finance"},"content":{"raw":"<h2>Why recognize sound accounting practices, and use financial statements and accounting principles to make informed judgments about an organization\u2019s financial health?<\/h2>\r\n[caption id=\"attachment_3934\" align=\"alignright\" width=\"135\"]<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/750\/2015\/06\/23083102\/Billy_Joel_Shankbone_NYC_2009.jpg\"><img class=\"wp-image-3934 \" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/750\/2015\/06\/23083102\/Billy_Joel_Shankbone_NYC_2009-231x300.jpg\" alt=\"Photo of singer-songwriter Billy Joel\" width=\"135\" height=\"175\" \/><\/a> Billy Joel at the 2009 premiere of the Metropolitan Opera in New York City.[\/caption]\r\n\r\nIf you don't\u00a0immediately recognize the\u00a0face in the picture, you'd probably recognize his music.\r\n\r\nIf you said this is Billy Joel, \"The Piano Man,\" well done! In case you\u00a0are unfamiliar with his accomplishments, read the following, from his Web site:\r\n<blockquote>Billy Joel has had 33 Top 40 hits and 23 Grammy nominations since signing his first solo recording contract in 1972. In 1990, he was presented with a Grammy Legend Award. Inducted into the Songwriters Hall of Fame in 1992, Joel was presented with the Johnny Mercer Award, the organization's highest honor, in 2001. In 1999 he was inducted into the Rock &amp; Roll Hall of Fame, and has received the Recording Industry Association of America Diamond Award, presented for albums that have sold over 10 million copies.\r\n\r\nIn November, 2014, Billy Joel received The Library of Congress Gershwin Prize for Popular Song. In 2014 he also received the once-in-a-century ASCAP Centennial Award, presented to American music icons in recognition of their incomparable accomplishments in their respective music genres and beyond[footnote]http:\/\/www.billyjoel.com\/biography[\/footnote]<\/blockquote>\r\nSo, what is Billy Joel pop\/rock icon and ex-husband of \"Uptown Girl\" and supermodel Christie Brinkley doing in the accounting\u00a0module? Well, Joel\u00a0apparently never took accounting or knew enough about its basic principles to be an <em>informed consumer<\/em> of his own financial information. How can we tell?\u00a0Because if he had understood how to read an income statement or balance sheet, he might\u00a0not have found himself\u00a0on the verge of bankruptcy in 1989.\r\n\r\nIn 1989 Billy Joel filed a $90-million lawsuit against\u00a0his former manager, Frank Weber, for mishandling his income and expenses. According to the court documents, just two of the charges were the following:\r\n<ul>\r\n \t<li>Weber\u00a0double-billed Joel for music videos, cheated him on expenses\u00a0(including travel and accounting fees), and mortgaged Joel's copyrights for $15 million without disclosing it\u00a0on Joel's financial statements.<\/li>\r\n \t<li>Weber caused phony financial statements to be issued to Joel, which painted an unrealistic picture of Joel's finances and the value of his investments and failed to reflect liabilities, guarantees, loans, and mortgages\u00a0on the financial statements.<\/li>\r\n<\/ul>\r\nHow was Joel\u00a0supposed to have known this was happening and prevented it? How could understanding\u00a0something about accounting have helped him? How can it help <em>you<\/em>?\r\n\r\nIn order to ask a question, you have to possess\u00a0enough knowledge about\u00a0a subject to know what to ask. Even understanding how to compare financial statements between multiple periods could have helped. Knowing what should have appeared on the various financial statements might\u00a0have helped Joel\u00a0spot gaps and missing information. Does that mean that understanding\u00a0accounting protects you (or Billy Joel) from unethical business practices? Unfortunately, if someone is determined to act unethically, they'll probably find a way.\u00a0Nonetheless,\u00a0becoming\u00a0an informed consumer of financial and accounting information can teach you what to look for, tip you off to irregularities, and reduce your\u00a0likelihood of being\u00a0a victim of others' financial dishonesty or mistakes.\u00a0 In short, there are many good reasons to study accounting even if you don't plan to be an accountant.\r\n\r\nThroughout this module you will learn about key financial statements, financial ratios, measures of corporate financial health, and some of the\u00a0ethical issues surrounding accounting practices. By the end, you might not be a rock star, but you'll be a more informed user\u00a0of financial information\u2014without learning the hard way!\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Define accounting, and explain its role as a form of business communication<\/li>\r\n \t<li>Identify key financial statements and their components, and explain the primary use of each type of statement<\/li>\r\n \t<li>Calculate the break-even point, where profit will be equal to $0, using information from financial statements<\/li>\r\n \t<li>Use financial statements to calculate basic financial ratios to measure the profitability and health of a business<\/li>\r\n \t<li>Discuss the importance of ethical practices in accounting and the implications of unethical behavior<\/li>\r\n<\/ul>","rendered":"<h2>Why recognize sound accounting practices, and use financial statements and accounting principles to make informed judgments about an organization\u2019s financial health?<\/h2>\n<div id=\"attachment_3934\" style=\"width: 145px\" class=\"wp-caption alignright\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/750\/2015\/06\/23083102\/Billy_Joel_Shankbone_NYC_2009.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-3934\" class=\"wp-image-3934\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/750\/2015\/06\/23083102\/Billy_Joel_Shankbone_NYC_2009-231x300.jpg\" alt=\"Photo of singer-songwriter Billy Joel\" width=\"135\" height=\"175\" \/><\/a><\/p>\n<p id=\"caption-attachment-3934\" class=\"wp-caption-text\">Billy Joel at the 2009 premiere of the Metropolitan Opera in New York City.<\/p>\n<\/div>\n<p>If you don&#8217;t\u00a0immediately recognize the\u00a0face in the picture, you&#8217;d probably recognize his music.<\/p>\n<p>If you said this is Billy Joel, &#8220;The Piano Man,&#8221; well done! In case you\u00a0are unfamiliar with his accomplishments, read the following, from his Web site:<\/p>\n<blockquote><p>Billy Joel has had 33 Top 40 hits and 23 Grammy nominations since signing his first solo recording contract in 1972. In 1990, he was presented with a Grammy Legend Award. Inducted into the Songwriters Hall of Fame in 1992, Joel was presented with the Johnny Mercer Award, the organization&#8217;s highest honor, in 2001. In 1999 he was inducted into the Rock &amp; Roll Hall of Fame, and has received the Recording Industry Association of America Diamond Award, presented for albums that have sold over 10 million copies.<\/p>\n<p>In November, 2014, Billy Joel received The Library of Congress Gershwin Prize for Popular Song. In 2014 he also received the once-in-a-century ASCAP Centennial Award, presented to American music icons in recognition of their incomparable accomplishments in their respective music genres and beyond<a class=\"footnote\" title=\"http:\/\/www.billyjoel.com\/biography\" id=\"return-footnote-1086-1\" href=\"#footnote-1086-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/p><\/blockquote>\n<p>So, what is Billy Joel pop\/rock icon and ex-husband of &#8220;Uptown Girl&#8221; and supermodel Christie Brinkley doing in the accounting\u00a0module? Well, Joel\u00a0apparently never took accounting or knew enough about its basic principles to be an <em>informed consumer<\/em> of his own financial information. How can we tell?\u00a0Because if he had understood how to read an income statement or balance sheet, he might\u00a0not have found himself\u00a0on the verge of bankruptcy in 1989.<\/p>\n<p>In 1989 Billy Joel filed a $90-million lawsuit against\u00a0his former manager, Frank Weber, for mishandling his income and expenses. According to the court documents, just two of the charges were the following:<\/p>\n<ul>\n<li>Weber\u00a0double-billed Joel for music videos, cheated him on expenses\u00a0(including travel and accounting fees), and mortgaged Joel&#8217;s copyrights for $15 million without disclosing it\u00a0on Joel&#8217;s financial statements.<\/li>\n<li>Weber caused phony financial statements to be issued to Joel, which painted an unrealistic picture of Joel&#8217;s finances and the value of his investments and failed to reflect liabilities, guarantees, loans, and mortgages\u00a0on the financial statements.<\/li>\n<\/ul>\n<p>How was Joel\u00a0supposed to have known this was happening and prevented it? How could understanding\u00a0something about accounting have helped him? How can it help <em>you<\/em>?<\/p>\n<p>In order to ask a question, you have to possess\u00a0enough knowledge about\u00a0a subject to know what to ask. Even understanding how to compare financial statements between multiple periods could have helped. Knowing what should have appeared on the various financial statements might\u00a0have helped Joel\u00a0spot gaps and missing information. Does that mean that understanding\u00a0accounting protects you (or Billy Joel) from unethical business practices? Unfortunately, if someone is determined to act unethically, they&#8217;ll probably find a way.\u00a0Nonetheless,\u00a0becoming\u00a0an informed consumer of financial and accounting information can teach you what to look for, tip you off to irregularities, and reduce your\u00a0likelihood of being\u00a0a victim of others&#8217; financial dishonesty or mistakes.\u00a0 In short, there are many good reasons to study accounting even if you don&#8217;t plan to be an accountant.<\/p>\n<p>Throughout this module you will learn about key financial statements, financial ratios, measures of corporate financial health, and some of the\u00a0ethical issues surrounding accounting practices. By the end, you might not be a rock star, but you&#8217;ll be a more informed user\u00a0of financial information\u2014without learning the hard way!<\/p>\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Define accounting, and explain its role as a form of business communication<\/li>\n<li>Identify key financial statements and their components, and explain the primary use of each type of statement<\/li>\n<li>Calculate the break-even point, where profit will be equal to $0, using information from financial statements<\/li>\n<li>Use financial statements to calculate basic financial ratios to measure the profitability and health of a business<\/li>\n<li>Discuss the importance of ethical practices in accounting and the implications of unethical behavior<\/li>\n<\/ul>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-1086\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Why It Matters: Accounting and Finance. <strong>Provided by<\/strong>: Lumen Learning and NGCC Team. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Billy Joel Shankbone . <strong>Authored by<\/strong>: David Shankbone. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Billy_Joel_Shankbone_NYC_2009.jpg#\/media\/File:Billy_Joel_Shankbone_NYC_2009.jpg\">https:\/\/commons.wikimedia.org\/wiki\/File:Billy_Joel_Shankbone_NYC_2009.jpg#\/media\/File:Billy_Joel_Shankbone_NYC_2009.jpg<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section><hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-1086-1\">http:\/\/www.billyjoel.com\/biography <a href=\"#return-footnote-1086-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":128,"menu_order":1,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Why It Matters: Accounting and Finance\",\"author\":\"\",\"organization\":\"Lumen Learning and NGCC Team\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Billy Joel Shankbone \",\"author\":\"David Shankbone\",\"organization\":\"\",\"url\":\"https:\/\/commons.wikimedia.org\/wiki\/File:Billy_Joel_Shankbone_NYC_2009.jpg#\/media\/File:Billy_Joel_Shankbone_NYC_2009.jpg\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-1086","chapter","type-chapter","status-publish","hentry"],"part":94,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/chapters\/1086","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/wp\/v2\/users\/128"}],"version-history":[{"count":31,"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/chapters\/1086\/revisions"}],"predecessor-version":[{"id":10797,"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/chapters\/1086\/revisions\/10797"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/parts\/94"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/chapters\/1086\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/wp\/v2\/media?parent=1086"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/pressbooks\/v2\/chapter-type?post=1086"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/wp\/v2\/contributor?post=1086"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wmintrobusiness\/wp-json\/wp\/v2\/license?post=1086"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}