Importance of Creativity in Applied Finance - Coursework Example

Running head: EXPLORE WHAT CREATIVITY MEANS IN YOUR FIELD OF STUDY Explore What Creativity Means in Your Field Of Study [Writer’s name] [Institution’s name] Explore What Creativity Means In Your Field Of Study Introduction In this fast paced world creativity has become an essential for every field of study. Even those fields which traditionally relied on standardized guidelines now have to use creativity to solve their problems. One such field is applied finance. According to Runco (1995) Creativity can be defined as nothing more than going beyond the present limits, whether those are limitations include skill, information, existing practices, social norms, or beliefs. Creativity is important for innovation ( Runco 1995 p45). Creativity is considered as the "cohort of ideas” (Gurteen 1998 p5). For example financial and technical factors require knowledge creation and generating novel ideas. And this can only be done by being creative. Creativity as becomes apart of many fields of studies previously believed in traditions rules of analysis. One such field of study is finance. Now financial experts use their creativity to give a more précis analysis creativity in this field has led financial research to study new topic and markets which were previously avoided. This paper will give a in-depth analysis of the importance of creativity in applied finance , keeping in mind the fact that creative problem solving and market forecasts have currently become apart of finance. Thesis statement Creativity plays an important role in the applied finance due to it’s requirement of problem solving and market analysis. Analysis Finance has two linked major roles of control and creativity. As a control Financial Management can be used to implement, monitor and evaluate a business strategy and creatively, finance can be used to power an organization towards its objective and to give the firm advantages over its competition. Applied finance requires a lot of creativity as the main function for many users is to estimate the future. However estimation can only be made by interpretation of the past for creative and innovative thinking is required. There is thus a significant shortcoming in any interpretation as to its effectiveness in estimating the future (Amabile 1996 p45). There are a lot of financial and technical factors which make an organization turn to creativity. Applied financial schools realize that boundaries can not be maintained just by changing plans now creativity has to be used even by their finical experts. Considering the fact that competition is quite intense thus financial experts who are studying applied finance have to be trained to use their creativity. Applied finance helps financial analysts to think creatively while making analyses of the market. As financial experts are thought to help a corporation or company makes more benefits and profits thus they require innovative and creative ways in which they can chalk out a strong financial plan for the organization. However, financial analysts work in different aspect and way to achieve user's goal in order to work in these aspects they use as creative pattern of thinking. Generally speaking, since their goal is to maximize the value of the company. they can only attain this goal through creativity as it will help them in a market where competition is at it’s peak (Joas 1996 p15). They are just like a doctor. They examine the whole financial condition of a corporation or company, and figure out the virus (bad strategy or financial policy). They cannot think in just one direction in order to achieve their goals, they need to think differently and more innovatively so that they can design a better plan or policy (Keeney 1992 p53). According to Bailey (1997) this diverse way of thinking helps financial experts to give and design more effective plans as they tend to study possible factor which may have affected the market (Bailey 1997 p14). “The information that a financial analyst needs to know is: working capital, account payable turnover, and Earnings per share. Financial analysts need to know the potential of a company and forecasts the financial needs of the company. In advance, financial analysts can make an accurate financial plan for the company.”(Ramesh 2000 p14) Financial analysts consider more about the value of company stock. So when they make financial analysis, they will put market value and stock price at the first place (Williamson 1991 p76). Financial experts at times have to give a detailed presentation to the head of all departments and thus they need creative ideas so that every time their presentation. Financial experts are required to study the financial system of the organization, investigate both good as well as bad side, collect outside financial position, and design a future financial plan (Kirkwood 1996 p12). They attempt to assist a company function more proficiently. Those who study applied finance even study how to provide information with stockholders, creditors, and those who are not part of the organization. Creativity is also required here because the finical expert has to give new and novel ideas of collecting this required information. Other information that assists in managers in the planning and control of activities include sales backlogs, example of information on revenue of an organization’s products and services (Garrison and Noreen, 1999 p23). Traditionally applied finance was only about statements such as income statements, balance sheets, statement of cash flow, as well as stockholders’ equity statements. But currently accounting experts include element in these statements which would give a better understanding to the user. In order to consider these factors the person creating the statements needs to have a creative mind set. Moreover, lending institutions require access to company financial statements when making decisions regarding loans and investment opportunities every decision has to be thought about in a different manner, thus the problem solving skill of such a. financial expert has to be innovative (Kirkwood 1996 p20). Applied finance helps financial experts to use financial data in many creative ways such as forecasting but also in doing budget analysis, comparative analysis, feasibility studies and in mergers and consolidation reports for businesses. The information that financial experts produce supports the operational and strategic needs of the enterprise. Measures of the economic condition of the enterprise such as the cost and profitability of the organization’s products, services, and customers are available only from management accounting systems. Financial experts make use of current accounting information to receive rapid feedback on their performance so that they can learn from the recent past and improve for the future, in order to make improvement the financial experts use their skill and knowledge to give appropriate and new forecasts. Used in this way, Financial experts support the organization’s continuous learning and improvements activities and thus enhance continues learning they require an ample amount of creativity. Financial experts measure the economic performance of decentralized operating units such as business units, divisions, and departments. It provides feedback to senior management about the units’ performance and also serves as the linkage between the strategy of the organization and the execution of the strategy in individual operating units. This requires a lot of analysis and as mentioned above this kind of analysis requires creative thinking and problem solving. In today’s competitive environment, experts of applied finance have become a part of the management team. They even participate in formulating and implementing strategy (Bailey 1997 p35). They can translate strategic intent into operational and managerial measures. Rather than just being caretakers of data and producers of historical reports, they can become the designers of an organization’s critical management information systems. Until now, financial experts would be successful without giving the concept of creativity or even considering creative problem solving. As the existing accounting procedures make it quite simple to solve financial problems. However as controllers progress from the back office to the meeting room, as they turn into financial analysts instead of just plain old number crunchers, the requirement to solve problems creatively has become extremely important. Nowadays, Financial experts work hard to design the best possible plan so that people’s problems can be effectively solved, they have to consider the most competent method to develop a business, they have to consult as well as counsel, and they have to work in cooperation with other professionals who frequently are not of the similar mind-set and in order to do all this they require creative problem solving(AICPA 1998; Elliott 1992).. However not like accounting practices, which they are thought in their academic institutions, creative problem solving is a talent a lot of financial professionals have to learn on their own. Luckily, it can be thought. Financial experts are generally partitioned into functional areas, two of which are audit or assurance services and consulting services. Audit services are performed in accordance with Generally Accepted Auditing Standards (GAAS), and auditors attest as to whether financial statements are prepared under Generally Accepted Accounting Principles (GAAP). These standards endow structure to the audit function in that they provide a framework for problem solving and limit the range of potential solutions. In contrast, the consulting function is neither standard-intensive nor guided by established rules. Consulting can be characterized as innovative-intensive in that consultants perform their services in a less-structured environment than do audit professionals and are often called upon to solve novel problems requiting creative and unique solutions (AAA 1986; Elliott 1992; Hood and Koberg 1991). Sweeney et al. (1999) found that U.S. undergraduate accounting majors were significantly less innovative than the general population, with approximately 70 percent of their sample classified as adaptors. Arunachalam et al. (1997) found that accounting experts which were classified as innovators performed significantly better on unstructured accounting tasks than accounting experts classified as adaptors. Accounting academicians and program administrators can play an important part in ensuring a supply of innovative accounting graduates sufficient to meet the demands of the profession. Researchers have suggested reducing the structure in accounting programs and adopting diverse instructional approaches designed to make the curriculum attractive to both innovators and adaptors (Sweeney et al. 1999; Wolk and Cares 1994). Accounting educators should also be aware that their own problem-solving style might influence their pedagogical approaches and propensity for implementing change (Wolk et al. 1997). Conclusion There was a time when creativity was something which was only required for social sciences. But according to me it has become a requirement of each and every field of study. As I verified in the above analysis applied finance is also one such field of study. From my experience I concluded that applied finance may be a field of study which has standardized guidelines; however the competitive environment has forced this field also to turn to creative thinking and problem solving. As this is the only way in which they can create effective and new financial plans. From my experience I can also conclude that this paper may also serve as an important implication for the study of applied finance, as it needs to become less structured and systems-oriented. I think that by carefully studying the structure, creativity, and innovativeness which is necessary within each functional area, applied finance may turn into a field of study in which a creative problem-solving style is adopted. 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