Conflict Issues and Special Topics of Invention in Corporate Accounting

While the field of Accounting is for the most part straight forward, there are certain areas where much persuasion happens. One of these areas is when a company is applying for a loan.

When the company will go to the bank to request a loan they might mention something like: “I recognize that we already have some loans outstanding, but look at our numbers. We have had a 50 percent increase in net income each of the last two years. Moreover our P/E Ratio is well above 40, showing that our investors have confidence in our future and are willing to invest their money into this company. If you compare our balance sheet against the industry leader we actually have a higher profit for every dollar of sales then they do. So as you can see, we will be able to more than pay the interest on this loan at our current growth rate. Imagine how much we could grow with this loan! The financial market rarely presents you with something as certain as this, now is not the time to pass this up.”

This is rife with examples of the company showing that the numbers are solid. I’ll refer to this special topic as letting the numbers do the talking. The purpose of a topic of invention is to come up with convincing material. In the accounting field the numbers represent the ultimate authority, so why not let them make the argument? One of the major common topics this example shows is that of comparison. Comparing your company to that of an industry leader happens very often. It shows that you are doing things right, or better yet, even superior to the industry leader. But, it is important to note that this too comes back to the numbers. One final common topic is that of past fact/ future fact. If you have been growing the last few years, then it is natural to assume that growth will continue. And once again, numbers are the basis of your argument.