Enhance assets or reduce liabilities?

http://www.nationalpost.com/Enhance+assets+reduce+liabilities/3704770/story.html

Summary

A banker and CEO once told the writers of this article that the two words, assets and liabilities, were more than the fundamental building blocks of the basic accounting equation. Certain people approach asset enhancement as a way of providing value to organizations and those people usually see the world as full of opportunities. Their weakness though, is that they are likely to fall in love with their positive evaluation. On the other hand, liabilities reduction is also an important value because people who are influenced by this approach usually see the world as full of threats but their weakness is that they are concentrating too much on the threat. The banker's knowledge was based on the concepts of asset enhancement and liabilities reduction, where it was a framework to look at financial structure and power. The assets enhancement vs. liabilities reduction framework is extremely useful in business because it helps up-and-coming executives reach their potential. Not only does it provide staffing teams with strong advocates for both viewpoints, it also provides the executives with the ability to make multiple perspectives on the same problem.

Connection

The connections to chapter two is the the basic accounting equation and the recording of transactions in the accounting system. According to chapter two, the basic accounting equation- assets = liabilities + shareholders' equity- is the basis of all accounting systems, where it must always remain equal. Transactions are recorded in this accounting system and it provides readers with information about this equality at the beginning to the end of the current accounting period. Users of financial statements usually want to know how and why the company's financial position changed from the beginning of the year to the end of the year by analising. Certain people believe that recording a higher asset is better than recording a lower liabilty but other people think that recording a lower liability is better than recording a higher asset.

Reflection

This article shows how being an executive or heads of a strategic company requires the ability to view certain things from many different perspectives on the same problem because it is critical for their success. Although certain people have different opinions and different view on things, leadership in a complicated world usually starts from simple first principles. In my opinion, viewing situations with more than one perspective and looking at it simplistically is certainly an excellent stepping stone, where it is also a profound advice. Although there is a tension between the concepts of asset enhancement and liabilities reduction, it still brings out the potential of young executives while providing employees with strong advocates for both perspectives.