Manage Assets, Liabilities, and Equity

Abstract

Managing the balance sheet can be more difficult than it needs to be. The following is a list of some of the reasons:

• 1. Sales wants to disregard concerns about creditworthiness and past due receivables.

• 2. Manufacturing wants to postpone writing off obsolete inventory to conceal mistakes. Sales and engineering support manufacturing in this nefarious activity when their incompetence got manufacturing into this mess in the first place.

• 3. The president does not want to recognize impairment of non-current assets or recognition of unrecorded liabilities that might imperil bonuses.

• 4. Financial officers have the same personal weaknesses as the rest of the population—that is, a substantial number of them are worried about how delivering bad news and being scrupulously honest will affect their jobs and bonuses. Some are also unethical.