Understanding Risk and Return: An Accountant's Essential Skill

This essay delves into the critical importance of understanding risk and return for aspiring accountants. It highlights that the role of an accountant has expanded beyond basic bookkeeping, emphasizing their significance in various stages of a company's growth, from initial planning to loan applications and audits. The essay underscores the need for accountants to assess financial performance and make strategic decisions, especially in a globalized environment with increased competition. It explains the different types of risks companies face, focusing on financial risks, and the accountant's role in identifying and managing them. The essay also discusses the relationship between risk and return in investment decisions, the importance of financial ratio analysis, and how understanding risk and return is essential for preparing financial statements, securing loans, and contributing to the overall financial health and market value of a company. The conclusion emphasizes the need for accountants to possess not only strong knowledge but also qualities like hard work, honesty, and ambition, along with superior analytical skills to make sound financial decisions.

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WHAT IS THE POINT OF LEARNING RISK AND RETURN IF I AM
PLANNING TO BECOME AN ACCOUNTANT
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“What is the point of learning about risk and return if I am planning
to be an accountant?”
INTRODUCTION
Hiring of an accountant is no more limited to only book-keeping. An accountant has a very
significant role to play at the various stages of a company’s growth. The fact about learning
about risk and return is important as they have a major contribution to make from the time a
person or a group of people plan to set up a business to the application for loans to audits.
Globalization has also contributed towards diversifying an accountant’s role. Organizations
can no more wait for the year to end so as to know the complete picture about the
performance due to increase competition. They continuously require a complete, honest,
noticeable and accurate data about their performance which needs to be assessed on a regular
basis. All this helps them to take quick decisions. Accounting is the fundamental
instrument with which the companies evaluate their financial performance and
additionally makes tactical choices(Vitez, 2017).
RISK AND RETURN
Risk is a part of any business organization and is indispensable by nature. It causes the
company to face various perils. Due to same, it is a necessity to examine the level of risk
which a company is ready to accept so as to conduct its business profitably. Some of the
common kinds of risks being faced by a company is strategic, financial, operational and
compliance related. But of the four, financial related risks is the most dangerous. It is the duty
of an accountant to identify the level of financial risk a company is facing while dealing with
the accounting of the same (Davis, 2016). Globalization has made it mandatory for an
accountant to take into account foreign exchange as well as interest rate risks.

The fact that an accountant simply provides an over view of the expected risk a company may
be facing basis the accounts that it handles cannot be denied. It cannot give a clear estimation
of the probable hazards even though learning about the risks faced by any organization is a
must for an accountant today. Further to this, he is also expected to check upon the returns
being generated by the company. The relationship sandwiched between risk and return is a
chief aspect that aids an investor in making good investment decision. Putting in money into
different fiscal instruments is agreed upon by many as a remarkable accounting practice. It is
the duty of an accountant to keep a tracker for all the instruments which are debt related and
maintaining a risk and return with regards these instruments would lend a helping hand to the
accountant for making right and more trustworthy accounting decisions(Blokhin, 2015).
IMPORTANCE FOR AN ACCOUNTANT TO LEARN ABOUT RISK AND RETURN
It is the duty of an accountant to accumulate, document, inspect and converse information
about the financial activities of a company. The main job of an accountant is to monitor and
arrange accurate and complete financial proceedings. They accomplish synopsis of the
monetary performance of the company. Appropriate investigation of financial records
by preparing assets, liabilities and reviewing capital of the company is what an
accountant does (Fontinelle, 2017). His liability extends till ensuring exactness of the
financial trading undertaken by a company along with undeterred observance to the
rules and regulations laid down by the institutes. Since an accountant is accountable
for the appropriate recording of the finances of an entity, it is very important for an
accountant to evaluate the risks and returns connected with the said entity.
Further depending upon the accounts prepared by an accountant, the auditors of a company
both internal as well as external determine about the truthfulness of the data published,
thereby giving an insight to the various investors and those who intend to invest in the

company with regards its performance. Depending upon the report submitted by these
auditors’ the monetary status is understood which in turn has a long lasting implication on the
market value of the company (Solution Matrix Limited., 2015). The owners i..e the
shareholders and the promoters of an entity are able to take decisions with regards what, how
and when to undertake a strategy for improvement and development, all revolves around the
details provided by an accountant in the financial statements of the dealings undertaken along
with the analysis with regards the risk and return. The accountants also undertake financial
ratio analysis which acts as a tool in the hands of the organization to compare and contrast
with the competitors. Thereby it is very clear that studying of the risk and return is of equal
importance for an accountant in the present scenario(Isiavwe, 2016).
Talking further in the same, the accountant is one who helps to prepare the accounts and
present the summary in such a format which enables the organization to avail loans easily.
Hence it is indispensable for any accountant to be aware of the expected financial gains; a
data which is very useful in the context of application for loans.
CONCLUSION
On a summarizing note, the above discussion makes it clear that an accountant’s position in
any entity is of utmost importance. He plays a pivotal role in execution of all finances such as
preparation of accounts and communication of the same in various forms and with various
analysis to the people who require it such as financiers and investors. Knowledge is crucial
but along with the same, an accountant is expected to be hard working, honest, dependable
and ambitious. Superior logical expertise along with possessing the potential to
examine the risks with regards the entity which would in turn entail to take good and
sound decisions for budgeting as well as external financing and to project the future

prospects for the company is important in the present modern, composite and
energetic business background.

REFERENCES:
Blokhin, A., (2015), Why Is It Important for an investor to understand business accounting,
Available at http://www.investopedia.com/ask/answers/042715/why-it-important-investor-
understand-business-accounting.asp (Accessed 05th October 2017)
Davis,S.S., (2016), What Role Does An Accountant Play In Business Operations? Available
at http://smallbusiness.chron.com/role-accountant-play-business-operations-411.html
(Accessed 05th October 2017)
Isiavwe,D., (2016), The role of the Accountant in Modern Business Organizations, Available
at file:///C:/Users/E-ZONE/Downloads/The%20Role%20of%20Accountants%20in
%20Modern%20Business%20Organizations.pdf (Accessed 05th October 2017)
Fontinelle,A., (2017),What Management Accountants Do, Available at
http://www.investopedia.com/articles/professionals/041713/what-management-accountants-
do.asp (Accessed 05th October 2017)
Solution Matrix Limited., (2015), Accountant and Accounting Explained. Definition and
meaning in business. Available at https://www.business-case-analysis.com/accountant.html
(Accessed 05th October 2017)
Vitez, O., (2017), Role of Accounting in the Modern Business Environment, Available at
http://smallbusiness.chron.com/role-accounting-modern-business-environment-4010.html
(Accessed 05th October 2017)