Six Levels of Financial Knowledge

With the appropriate framework to shape financial knowledge, the management accounting function should become an organization's principal decision-support platform. The framework consists of six levels of financial knowledge, and the word "financial" is most operative here. The Level 1 knowledge base connects a business to the outside world. When you have output volume and variable cost per output unit, you have the basis for Level 2 vocabulary. When a business transitions to Level 3, it has learned that return on assets must be employed as the enterprise's guiding profitability gauge. There is a very distinct increment in knowledge when moving to Level 4. This increment recognizes that the business is not just an output system but a highly interdependent input/ throughput/output system. Level 5 financial knowledge is accomplished only with very contemporary supporting systems, structures, and processes. At Level 6, a business not only exhibits Level 5 knowledge, but it can apply it across multiple time periods.