The Value Of Charts To A Company Explained
Topics: stocks, stock market, stock trading
Charts are a forceful means of presenting vital information to corporate management. They are industry’s proof of the expression “A picture is worth a thousand words”.
Charts tell a story which pages of statistics and interpretive comment cannot match. Trends of past performance can be related to forecasts of future plans. Preliminary estimates can be plotted, revised and put in final form on a chart in a relatively short period of time. The preparation of comparable pages of statistical summary and subsidiary schedules, in a formalized style, could conceivably require many additional hours by a large number of people.
Charts should be used more extensively by executives, especially those individuals who have difficulty struggling through statistical reports or who have insufficient time to read all the interpretive comments flowing across their desks each day.
It is recommended that a company begin its charting program on a modest and realistic basis. It is usually best to begin with total sales, profits, assets, profit ratio to sales, asset turnover and return on assets. Any attempt to launch a full-scale program, which includes each division and its product lines and all the pertinent data relating to them, is likely to result in confusion, undue delays, misinterpretation and a breakdown of sensible planning.
These additional charts should be included after the total company charts have been carefully prepared, reviewed by management and selected as a basis for periodic business review meetings.
The charts should be readily accessible to the top corporate management at all times. The charts relating to individual divisions should be available to the divisional management. However, it is essential, when a discussion of charts is scheduled, that a member of the financial department be present to properly interpret the data under discussion.
Too often scales are misread, headings are overlooked, technical information is misinterpreted and conclusions are erroneously drawn. This brings up the necessity for having top management participate in the final decision regarding the basic chart style to be used. It is of no value to receive management support for a chart program and then to present all company data on charts which cannot be understood.
At the same time the management should indicate a preference for line charts versus bar charts, or a sensible blending of both. This type of direction from the top can help both the executive and those charged with the responsibility for presenting the material. At the inception of a chart program the corporate controller should have alternate charts prepared and review them with the executive management, explaining what can be expected from the charts and what information is adaptable to charts.
Any company embarking on a chart program would do well to follow a fundamental principle of chart preparation and availability. Before any charts are shown to a member of the operating or top executive management, they should be thoroughly reviewed by the top financial officer of the company, so that he is fully prepared to answer any questions. This is made easier if the charts are kept in a room especially designed for the review of charts.
It can then be agreed that no charts will be displayed prior to their receiving approval from a designated financial officer of the company. This basic procedure will do much to insure the success of a chart program. Each chart should be accompanied by interpretive comments.
The most effective charts are the simple ones. Any chart which attempts to compress too much diversified information onto one graph is doomed to failure. It is also liable to create the impression that charts cannot assist the management in easily understanding the business.
Just as charts need not be complex, neither must they be fancy or elaborate. While a chart prepared by a professional, with a background in mechanical drawing or commercial art, will look better than one drawn by an amateur, the message, if properly presented, will be just as factual and easy to understand in either instance.
For any company, the introduction of charts will make life easier.
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