Help me to suggest a simple and specific statement on financial management that focuses on qualitative data.

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There is a reason why sound financial statements include both quantitative and qualitative information: the two types of research and analysis are essential for fully understanding the data that is represented on those statements. The student's request--help to understand the importance of qualitative data in financial statements--can only be answered...

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There is a reason why sound financial statements include both quantitative and qualitative information: the two types of research and analysis are essential for fully understanding the data that is represented on those statements. The student's request--help to understand the importance of qualitative data in financial statements--can only be answered with some discussion of the merits of applying both types of data, as all financial statements include, obviously, quantitative data. Quantitative data is the nuts-and-bolts of a financial statement--the columns reflecting sources of revenue and categories of expenses. In other words, how much money is coming in, and how much is going out the door to pay for tangibles like personnel, material, marketing, and real estate. That's all pretty basic stuff. It is the incorporation into the analysis, however, of qualitative research that instills in the exercise a greater level of meaning. Qualitative data provides context that may not be readily apparent when perusing those mind-numbing columns of numbers. Marketing, for instance, is an expense the value of which often cannot be easily determined, especially absent field surveys that are not always appropriate variables to impose upon customers. Yet, marketing can represent a significant percentage of the expenses a business incurs in the course of its fiscal year. Advertising, along with customer relations, represents an intangible asset; it can be instrumental in instilling in the marketplace a positive perception of the corporation in question. There is a reason politicians running for elective office raise so much money: money, within the context of a political campaign, equals visibility. That visibility, in turn, equals name recognition and a positive perception associated with that name. 

When contemplating a thesis on financial statements that emphasizes the importance of qualitative, as opposed to quantitative, data, the student should focus on areas like marketing and the role of positive perceptions of the company in question. Does the company have a reputation for meeting deadlines and for producing a product that meets or exceeds standards? Has the company been able to survey or otherwise study the marketplace for perceptions of itself among customers and potential new clientele? Costs associated with such activities will be reflected on financial statements, but the results of those activities will not necessarily be readily apparent to those perusing the data. It is the responsibility of those preparing the financial statements, therefore, to ensure that the documents presented to stockholders, corporate officers, and others reflects the full spectrum of data and analysis.

 

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