Business and Management Information

Financial Data and Financial Information

The word data is the plural of datum which means something that is taken as a basis for reasoning or inference to arrive or form a conclusion. In simple words it is a fact that is taken as is and is used to form basis of conclusion. So we can say that data is a collection of raw facts and figures.

Usually data itself is not useful in its original state and needs to be processed in a way that it becomes meaningful and useful to the user. The process can be anything that adds meaning and utility to the data. Once data is processed it becomes information and user uses information to reach conclusions rather than data itself. However, we cannot undermine the importance of data as it is a necessary input in our decision making process.

However, the terms data and information are relevant in nature or in other words situation dependant. In one situation data might be used as information and at the same moment in another situation information becomes data. Due to this reason sometimes it is impossible to tell what is data and what is information. But one thing is obvious that it is information that is communicated to the user and ultimately used for decision making purposes.

The information should have the following characteristics to be good information:

1. Relevant
2. Reliable
3. Accurate
4. Complete
5. Communicated timely
6. Communicated to correct person
7. Precise
8. Understandable
9. Possess value
10. Comparable
11. Appropriate channel and medium

Relevance

Information is considered relevant which adds value to the decision making process by providing the required bits and pieces of past, present and future times. It is this characteristic of information that users can either confirm or correct the existing conclusions reached. In simple words through relevant information users can evaluate whether they are moving along the right path i.e. making correct decisions. It must be noted that there are number of the other qualitative factors that enhance the relevance of information and it should not be considered as standalone feature of information.

Reliability

Information is reliable when it is dependable. Information may be relevant but this alone does not suffice as an alternative for reliability as well. Information must be reliable as well as relevant in order to be useful for decision making. Information must be free from bias and complete in order to be reliable. Also the source of information greatly affects the reliability of information.

Accuracy

Information needs to be accurate so that users can rely on information for decision making purposes. Only accurate information can help in reaching favourable conclusions and render favourable results. However, information should be accurate to the level necessary as absolute accuracy is not only impossible but also requires many resources which may not be simply feasible.

Completeness

Information is said to be complete when it has all the information that is relevant to the users’ decision and nothing material is omitted. An incomplete information may adversely affect the users’ decisions and they may end up with completely different decision altogether.

Timeliness

Information must be communicated on timely basis. Information delivered too earlier or too late is worthless.

Communicated to appropriate person

Information must be communicated to the appropriate person. Appropriate person is the person who is in a position to use information in his decisions and take action on the basis of such information etc. However, it may be possible that there are more than one users requiring the same information and in such situation information must reach to all such users.

Precision

One of the important qualities of information is that it should be precise i.e. not too long that it is impossible to absorb completely or too short that it loses its value. Many people only look insufficient volume of information to be wrong but too much information, also known as information overload, is equally harmful as it creates confusion and other problems.

Understandability

Information is used by users only if they can understand it. Understandability of information is enhanced by the way it is presented and communicated to the user. Information may be complex and hard to grasp by the users but information must not omitted because it is complex and not easily understandable by the users as it may deteriorates its relevance and reliability. Also it is not only they duty of the entity to make information understandable. Users are also required to have reasonable skills to understand the information.

Value

Information is considered to possess value when the benefits of information exceed the cost incurred to gather such information. However the value of information is measured by the extent it has improved the decision of the user. The information that adds no value to the decision by improving it is useless. It is the outcome of the decision that is referred as benefits and which should exceed the cost of information.

Comparability

Information is more useful when it is comparable. This enables the user to conduct different types of analysis and enables him to rank different alternatives and prioritize different tasks. Comparability is dependent on the basis, rules, policies and conventions used for preparing information and the way it has been presented.

Appropriate channel of communication

Usability of information is greatly affected by the channel through which it has been communicated to the user. Which channel is appropriate to communicate information depends on lots of factors few of which are: nature of information, intended users, cost of communication, time etc. The relevance and reliability of information may be hampered due to inappropriate channel used for communication.