Finance for Managers

[Pages:240]Finance for Non-Financial

Managers

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BriBeAofcoakse

Finance for Non-Financial

Managers

Gene Siciliano

McGraw-Hill

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DOI: 10.1036/0071425640

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Contents

Preface

ix

1. Counting the Beans: How Critical Is Good Financial

Information, Anyway?

1

Managing a Company in Today's Business Environment

1

The Role of the Finance Department

5

GAAP: The "Rules" of Financial Reporting

7

The Relationship of Finance and Accounting to the Other

Departments

9

Manager's Checklist for Chapter 1

11

2. The Structure and Interrelationship of Financial

Statements

12

Tracking the Life Cycle of a Company

14

Accounting Is Like a Football Game on Videotape

16

The Chart of Accounts--A Collection of Buckets

20

The General Ledger--Balancing the Buckets

23

Accrual Accounting--Say What?

25

The Principal Financial Statements Defined

27

Manager's Checklist for Chapter 2

30

3. The Balance Sheet: Basic Summary of Value

and Ownership

31

Assets and Ownership--They Really Do Balance!

31

Current Assets--Liquidity Makes Things Flow

34

Fixed Assets--Property and Possessions

39

Other Assets--The "Everything Else" Category

41

Current Liabilities--Repayment Is Key

41

Long-Term Liabilities--Borrowed Capital

45

v

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vi Contents

Ownership Comes in Various Forms

46

Using This Report Effectively

49

Manager's Checklist for Chapter 3

49

4. The Income Statement: The Flow of Progress

51

They Say Timing Is Everything--And They're Right!

51

Sales: The Grease for the Engine

54

Cost of Sales: What It Takes to Earn the Sale

55

Gross Profit: The First Measure of Profitability

56

Operating Expenses: Running the Business

57

Operating Income: The Basic Business Bottom Line

60

EBITDA--He Bit Who?

61

Other Income and Expenses--Not Just Odds and Ends

61

Income Before Taxes, Income Taxes, and Net Income

62

Earnings per Share, Before and After Dilution--What?

63

Using This Report Effectively

65

Manager's Checklist for Chapter 4

66

5. A Profit vs. Cash Flow: What's the Difference--

and Who Cares?

67

The Cash Flow Cycle

68

Cash Basis vs. Accrual Basis

74

Net Profit vs. Net Cash Flow in Your Financial Reports

76

Manager's Checklist for Chapter 5

81

6. The Cash Flow Statement: Tracking the King

83

Beginning Where the Income Statement Ends

85

Cash from Operations--Running the Business

87

Cash for Investing--Building the Business

93

Cash from Financing--Capitalizing the Business

95

Using This Report Effectively

97

Manager's Checklist for Chapter 6

98

7. Critical Performance Factors: Finding the

"Hidden" Information

99

What Are CPFs? Do They Mix with Water?

100

Measures of Financial Condition and Net Worth

101

Measures of Profitability

105

Measures of Financial Leverage

108

Measures of Productivity

112

Trend Reporting: Using History to Predict the Future

115

Manager's Checklist for Chapter 7

119

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