1.  Introduction

In the development of modern enterprises, effective business decisions should not rely solely on personal intuition or experience but rather be grounded in accurate and comprehensive financial data. Accurate financial information can significantly assist enterprises in making decisions. In today’s complex and information-rich business environment, it is extraordinarily complicated to inquire about lots of resources. Therefore, a complete and precise set of financial statements is more likely to save time, reduce expenses, and improve decision efficiency for enterprises.

Financial accounting information is a vital tool for internal managers and external decision-makers of enterprises to make business decisions and conduct risk assessments. It is also one of the perspectives that should be taken into account for the return on investment or takeovers.

This article conducts a study on the significance of financial accounting information for enterprise decision-making and demonstrates the important role of financial information in the development of enterprises through some practical cases and analyses. The results of this study have important reference value for promoting enterprises to understand and attach importance to the role of financial accounting information and improving the decision-making efficiency of enterprises. Hence, financial information can well reflect a company's business performance and financial status, providing a professional and important basis for future financing and enterprise development.

2.  Overview of financial accounting information

2.1.  Definition and classification of financial accounting information 

Financial accounting information refers to important data and information that reflect the financial status, operating results, and cash flows of an enterprise through systematic recording, classification, summary, and analysis in the course of its operation [1].

Generally, accounting information can be classified along different dimensions:

By content, it comprises financial information and non-financial information. Financial information includes assets, liabilities, equity, income, expenses, and profits. Non-financial information, for instance, includes a company's reputation, goodwill, and social responsibility. Goodwill is an intangible asset equal to the difference between the sale price of the business and the net value of assets less liabilities. In the process of business decision-making, the goodwill valuation of an enterprise constitutes a pivotal component of the comprehensive evaluation framework.

By purpose, it can be divided into managerial information and financial information. Managerial information is used for internal management, which is tailored and logical. While financial information is for external investors, which is standardized and comprehensive. For instance, as for the investors, financial information would make a significant difference by conducting a comprehensive analysis of the operational mechanisms of selected enterprises.

Furthermore, information can be classified by time into historical and predictive information. Historical information refers to past transaction data, while predictive information includes future budgets and forecast reports.

2.2.  Functions and applications of financial accounting information

There are distinctive forms of financial accounting information, ranging from statement of profit or loss to statement of financial position. Different accounting information performs distinctive functions.

Statement of profit or loss mainly focus on profitability. Firstly, in terms of revenue, such as operating income, it can demonstrate the company's sales ability and market performance. Then there are costs and expenses, like cost of sales and administrative expenses, which can help analyze the cost control situation. Secondly, it is net profit, which is the final profit outcome and reflects the company's profitability. Additionally, various items in the income statement can be used to calculate financial ratios, such as gross profit margin and net profit margin, which are crucial for evaluating the company's performance.

The statement of profit and loss plays a crucial role in corporate decision-making as it offers a comprehensive overview of a company's financial performance over a specific period by detailing revenues, costs, and profits. This information enables managers to assess the effectiveness of business strategies, identify cost-saving opportunities, and evaluate the profitability of different product lines or services. For example, if the statement of profit and loss reveals a declining gross margin, it may prompt a review of pricing strategies or cost structures. Additionally, investors and creditors use the statement to gauge the company's ability to generate earnings and meet its financial obligations. Thus, the statement of profit and loss is an essential tool that supports informed decision-making and helps drive the long-term success of a business.

The statement of financial position presents the financial standing of an enterprise on a specific date and is one of the main statements that an enterprise prepares externally. It reflects the economic resources owned or controlled by an enterprise on a specific date, the current obligations it undertakes, and the owner's claim to net assets [2]. The statement of financial position is also a vital instrument in corporate decision-making. It provides a snapshot of a company's financial health by presenting its assets, liabilities, and equity at a specific point in time. This statement enables management to assess the company's liquidity, solvency, and overall financial structure. For instance, by analyzing the current ratio (current assets divided by current liabilities), managers can determine the company's ability to meet its short-term obligations. Additionally, the balance sheet highlights the sources of funding and the allocation of resources, allowing decision-makers to evaluate capital investment decisions, plan for future financing needs, and manage debt levels effectively. By understanding the interplay between assets, liabilities, and equity, businesses can make informed choices that enhance their financial stability and growth potential.

Beyond internal management, financial accounting information profoundly impacts external stakeholders. For example, potential investors assessing whether to buy the stocks will review financial reports to evaluate the credit status, profitability, and investment value of enterprises. This transparency of accounting information enhances the market competitiveness and financing capacity of enterprises.

In addition, financial accounting information is an important basis for enterprises to choose financing methods. The common financing methods for enterprises mainly include debt financing and equity financing. Debt financing refers to the process by which an enterprise raises working capital or capital expenditure by selling bonds, notes, etc. to individual or institutional investors. Equity financing is achieved by expanding the owner's equity of an enterprise, such as attracting new investors, issuing new shares, and making additional investments, rather than transferring the owner's equity or selling stocks [3]. Financial information serves as the foundation upon which lenders and investors make their funding decisions. Potential investors will scrutinize the income statement to assess the company’s revenue growth and profitability trends, while lenders may focus on the balance sheet to evaluate the company’s asset base and debt levels. Cash flow information holds particular significance as it reflects a company's capacity to generate and manage cash resources, which is crucial for loan repayment and operational sustainability. By providing reliable financial data, enterprises can establish credibility with financial institutions, negotiate more favorable terms, and ultimately obtain essential funding to support their growth and expansion strategies.

In summary, financial information provides comprehensive, accurate, and timely business data and offers significant support for enterprises in strategic planning, resource allocation, and risk management.

3.  The quality and effectiveness of financial accounting information

3.1.  Characteristics of high-quality financial information

High-quality financial information is essential for effective business decision-making. Its core characteristics include accuracy, timeliness, reliability, and relevance:

Accuracy is the primary feature of the quality of accounting information, referring to the consistency and precision between the information and the actual cost situation. Accurate cost accounting information can provide real and reliable data, offering decision-makers an accurate cost basis and thereby helping them make wise decisions. Timeliness refers to the timeliness and appropriateness of cost accounting information in the decision-making process. Timely cost accounting information can provide the data needed for decision-making, enabling decision-makers to respond and adjust quickly to adapt to changes in the market and demand. Reliability refers to the credibility and stability of cost accounting information [4]. Relevance refers to the correlation and applicability between cost accounting information and specific decisions [4].

3.2.  The role and impact of high quality financial information

The success of an enterprise depends on many factors, among which the quality of financial information plays a critical role. In terms of decision-making accuracy and reliability, high quality accounting information includes accurate data and statements that truly reflects the financial status of an enterprise, such as asset value, liability scale, profit margins, operating performance and cash flow. This helps avoid misleading decision-makers and managers of the enterprise and providing a solid foundation for management to assess the actual operational capacity of the enterprise.

In contrast, low-quality data may be misreported or embellished, such as overstated revenue or concealing liabilities, leading to decision-making deviations. For example, overestimating profits may prompt unnecessary expansion, increasing risks and reducing market shares.

Furthermore, high-quality financial information reports can precisely disclose important details such as related-party transactions, contingent liabilities, and asset impairments. These disclosure help enterprises identify financial risks in advance and formulate response strategies. For instance, a company may adjust its financing plan in a timely manner to avoid a future liquidity crisis.

Comparing with high-quality information, low-quality financial information often uses vague or implicit expressions, making it harder for enterprises to detect potential crises, such as debt default and the risk of customer collection. The time-lag in response will cause the company to miss the best opportunity to deal with it.

4.  Analysis of the motivations for financial fraud 

Financial fraud refers to the deliberate practice wherein accounting professionals or related practitioners, motivated by personal gain or the interests of limited groups, exploit vulnerabilities in accounting standards through illicit means, including data manipulation and fabrication of financial information, to achieve their objectives [5]. Financial fraud by listed companies is mainly carried out through means such as asset reorganization, fictitious sales, and fictitious asset evaluation [6].

Such practices not only distort market efficiency but also undermine public trust in capital markets. The motivations behind financial fraud can be categorized into subjective and objective factors.

4.1.  Subjective reasons for financial fraud 

Subjective motivations for financial fraud primarily stem from internal interests and strategic goals. The most fundamental reason for a company to engage in financial fraud is the drive of interests. According to relevant regulations, a company's listing needs to meet a series of prerequisite conditions, one of which is to examine the company's profit situation and financial status [6]. A company chooses to go public in order to obtain more investment or financing. However, whether it chooses to borrow from a bank or raise funds from a bank, it needs to submit a complete financial statement [7]. Hence, the company wants to emerge with a healthy financial statement in order to attract more investors and gain more listed funds.

Secondly, the valuation of a company's stock for an initial public offering (IPO) is based on past financial statements, as well as current market conditions and industry prospects. Different financial statements, such as the income statement or the cash flow statement, can reflect the company's future operating capabilities and estimated earnings over the next few years. Investment banks conduct comprehensive due diligence on the company, assess its market competitiveness and growth potential, and make judgments based on these factors to provide professional advice on the stock issuance price. Therefore, some companies that are about to go public may engage in financial fraud to present a healthy financial report in order to set a higher stock price.

4.2.  Objective reasons for financial fraud 

In addition to internal motivations, financial fraud can be caused by unpredictable economic circumstances. During an economic recession, enterprises may face the pressure of declining revenue and reduced profits. To cover up such poor performance, enterprises may beautify their financial statements through financial fraud to make them look more attractive.

Furthermore, in a highly competitive market environment, enterprises may need to demonstrate strong financial performance to attract investors and customers. This kind of pressure may lead enterprises to adopt improper means to improve financial indicators in order to maintain competitiveness. Besides, from external perspectives, financial fraud might also be caused by lagging supervision. Some regulatory authorities may fail to detect and handle financial fraud in a timely manner, leading enterprises to believe that even if they engage in financial fraud, it may not be detected and punished promptly.

5.  The impact of financial fraud and other factors on business operations

Financial fraud can have profound and far-reaching consequences for a company’s operations, reputation, and stakeholder relationships.

First of all, there will be significant differences in taxation. Some companies will evade taxes by increasing false financial expenditures or falsely reporting some data. This will expose the company to huge fines and have a significant impact on the company's reputation. Some consumers may choose other operators, and the original investors of the enterprise may also withdraw their investment or reduce their capital input. This will increase the profits and sales volume of its competitors and also the market share they occupied.

Secondly, financial fraud by listed companies may also trigger a second round of trust crisis [8]. This may lead some investment institutions to conduct more rigorous investigations and audits on it or even reduce investment. It will also increase the difficulty for companies to go public abroad and significantly raise the listing costs. For investors, their economic interests can be severely compromised. Typically, individual investors lack the expertise in financial analysis, and their primary basis for investment decisions is the company's financial statements. When a company engages in financial fraud, investors may purchase stocks based on false financial information, thereby suffering substantial economic losses.

Additionally, financial fraud can seriously undermine investors' trust in the market. They may lose confidence in the entire market, thereby reducing their investment or exiting the market. This trust crisis not only affects individual investors but may also have a negative impact on the overall stability and healthy development of the market. The authorities should enhance the supervision of financial fraud by listed companies, exert pressure on companies from the perspective of auditing, and eliminate the opportunities for companies to engage in financial fraud [9].

6.  Conclusion

In conclusion, financial accounting information plays a crucial role in corporate decision-making as It can provide significant reference data for business operations and decision-making. Accurate and rational corporate decisions cannot be made without the support of financial information. It is not only one of the important bases for helping enterprises to raise funds but also one of the pieces of evidence for measuring the performance of enterprise operations in the market. In addition, high-quality financial accounting information is crucial for the sustainable development of enterprises and serves as an important basis for the management of enterprises to make scientific decisions, which can help to avoid misleading decision-makers and managers of enterprises. Improving the quality of financial accounting information for enterprises is of great significance for firms to achieve long-term and stable development. However, this paper does not specifically analyze the methods that can be used to improve the quality of financial accounting information, which is a topic worthy of further research. This may include the supervision and management of enterprises by different organizational authorities.

Future research can further explore how to improve the financial accounting system to enhance the quality of information and the use of financial accounting information in different market environments. Despite some limitations, this study has significant reference value for promoting enterprises to attach importance to the role of financial accounting information and improving the decision-making efficiency of enterprises. Hence, enterprises should attach importance to the maintenance and improvement of the quality of cost accounting information and take corresponding improvement measures to succeed in the highly competitive market.