This is “The Bigger Picture”, section 3.5 from the book Finance for Managers (v. 0.1).
This book is licensed under a Creative Commons by-nc-sa 3.0 license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms.
This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book.
Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page.
For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (2 MB) or just this chapter (88 KB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
PLEASE NOTE: This book is currently in draft form; material is not final.
Financial problems often have quantifiable components (such as maximizing return, revenues, or profits, or minimizing expenses or risk) and calculating these accurately is certainly important to the decision making process. Impact upon the “bottom line” is a key consideration, but it is not the only consideration; relying upon one or two numbers to justify a business decision is usually too narrow in scope. Throughout this book, many of our exercises are indeed simplifications, designed to allow a student to focus on one particular aspect of a financial problem. But we encourage students to think beyond the problems as presented and consider how they might appear in a “real world” situation. Discussion with colleagues and instructors can help to illustrate how the techniques we present might be part of a larger management decision with answers that are not as clear cut.
Since ethical considerations pervade everything we do, each following chapter will have a section in “The Bigger Picture” devoted to ethics. While we can in no way be exhaustive in addressing ethical issues, our hope is to, at a minimum, begin the discussion about what is right and just concerning the financial topics we present.