Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What the Numbers Really Mean

by Karen Berman, Joe Knight, John Case (With)

Overview

The book Inc. magazine calls one of "the best, clearest guides to the numbers" on the market.

Inc. magazine calls it one of "the best, clearest guides to the numbers" on the market. Readers agree, saying it's exactly "what I need to know" and calling it a "must-read" for decision makers without expertise in finance.

Since its release in 2006, Financial Intelligence has become a favorite among managers who need a guided tour through the numbers--helping them to understand not only what the numbers really mean, but also why they matter.

This new, completely updated edition brings the numbers up to date and continues to teach the basics of finance to managers who need to use financial data to drive their business. It also addresses issues that have become even more important in recent years--including questions around the financial crisis and those around broader financial and accounting literacy.

Accessible, jargon-free, and filled with entertaining stories of real companies, Financial Intelligence gives nonfinancial managers the confidence to understand the nuance beyond the numbers--to help bring everyday work to a new level.

Product Details

ISBN-13:	9781422144114
Publisher:	Harvard Business Review Press
Publication date:	02/19/2013
Edition description:	Revised
Pages:	304
Sales rank:	36,243
Product dimensions:	6.10(w) x 9.40(h) x 1.20(d)

About the Author

Karen Berman and Joseph Knight are the founders of the Los Angeles-based Business Literacy Institute. They train managers at organizations such as American Express, P&G, Pacific Life, GM and Tyco International. They have been interviewed in a wide range of print media including BusinessWeek, USA Today and the Los Angeles Times.

Table of Contents

Preface: What Is Financial Intelligence? xi

Part 1 The Art of Finance (And Why It Matters)

1 You Can't Always Trust the Numbers 3

2 Spotting Assumptions, Estimates, and Biases 10

3 Why Increase Your Financial Intelligence? 17

4 The Rules Accountants Follow-and Why You Don't Always Have To 26

Part 1 Toolbox: Getting What You Want; The Players and What They Do; Reporting Obligations of Public Companies 36

Part 2 The (Many) Peculiarities of the Income Statement

5 Profit Is an Estimate 43

6 Cracking the Code of the Income Statement 48

7 Revenue: The Issue Is Recognition 56

8 Costs and Expenses: No Hard-and-Fast Rules 63

9 The Many Forms of Profit 75

Part 2 Toolbox: Understanding Variance; Profit at Nonprofits; A Quick Review: "Percent of" and "Percent Change" 83

Part 3 The Balance Sheet Reveals the Most

10 Understanding Balance Sheet Basics 89

11 Assets: More Estimates and Assumptions (Except for Cash) 95

12 On the Other Side: Liabilities and Equity 106

13 Why the Balance Sheet Balances 111

14 The Income Statement Affects the Balance Sheet 114

Part 3 Toolbox: Expense? Or Capital Expenditure?; The Impact of Mark-to-Market Accounting 119

Part 4 Cash Is King

15 Cash Is a Reality Check 125

16 Profit ≠ Cash (and You Need Both) 129

17 The Language of Cash Flow 135

18 How Cash Connects with Everything Else 139

19 Why Cash Matters 148

Part 4 Toolbox: Free Cash Flow; Even the Big Guys Can Run Out of Cash 152

Part 5 Ratios: Learning What the Numbers are Really Telling You

20 The Power of Ratios 157

21 Profitability Ratios: The Higher the Better (Mostly) 164

22 Leverage Ratios: The Balancing Act 172

23 Liquidity Ratios: Can We Pay Our Bills? 176

24 Efficiency Ratios: Making the Most of Your Assets 179

25 The Investor's Perspective: The "Big Five" Numbers and Shareholder Value 185

Part 5 Toolbox: Which Ratios Are Most Important to Your Business?; The Power of Percent of Sales; Ratio Relationships; Different Companies, Different Calculations 191

Part 6 How To Calculate (And Really Understand) Return on Investment

26 The Building Blocks of ROI 197

27 Figuring ROI: The Nitty-Gritty 203

Part 6 Toolbox: A Step-by-Step Guide to Analyzing Capital Expenditures; Calculating the Cost of Capital; Economic Value Added and Economic Profit-Putting It All Together 216

Part 7 Applied Financial Intelligence: Working Capital Management

28 The Magic of Managing the Balance Sheet 225

29 Your Balance Sheet Levers 229

30 Homing In on Cash Conversion 234

Part 7 Toolbox: Accounts Receivable Aging 239

Part 8 Creating a Financially Intelligent Company

31 Financial Literacy and Corporate Performance 243

32 Financial Literacy Strategies 249

33 Financial Transparency: Our Ultimate Goal 257

Part 8 Toolbox: Understanding Sarbanes-Oxley 259

Appendix: Sample Financials 261

Notes 265

Acknowledgments 267

Index 271

About the Authors 285

Editorial Reviews

"Nonfinancial managers will appreciate this nontechnical, in-depth guided tour through financial statements and financial concepts and analysis. -- Choice Magazine

From the Publisher