10.4.1—Accounting data for strategy

Accounting data such as profit, cash flow, assets, costs and ratios provides evidence for strategic choices. It should be combined with market, operational and stakeholder information.

Historical accounts describe what happened under past conditions; strategy concerns future choices. Definitions, one-off items and accounting policy can affect comparability.

A falling margin may prompt a pricing review, but managers should also check product mix, customer retention, capacity and competitor moves before changing strategy.

Financial data is evidence, not the whole explanation; a ratio cannot replace causal investigation.