Financial Management for Non-Financial Managers [NOOK Book]

Overview

Financial Management for Non-Financial Managers is an accessible, practical and easy to understand guide that will allow any manager to gain confidence in understanding financial matters, managing a budget and dealing with bankers, accountants and finance professionals. A source of invaluable expert advice on all the essential aspects of financial management, it covers: business structures, accounting and financial statements, analysis and ratios, planning, budgeting, product and service costing, setting selling ...
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Financial Management for Non-Financial Managers

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Overview

Financial Management for Non-Financial Managers is an accessible, practical and easy to understand guide that will allow any manager to gain confidence in understanding financial matters, managing a budget and dealing with bankers, accountants and finance professionals. A source of invaluable expert advice on all the essential aspects of financial management, it covers: business structures, accounting and financial statements, analysis and ratios, planning, budgeting, product and service costing, setting selling prices, investment appraisal, finance and working capital, taxation and international transactions. Online spreadsheets and worksheets are included to accompany key skills and practices explained in the book.
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Product Details

  • ISBN-13: 9780749464684
  • Publisher: Kogan Page, Ltd.
  • Publication date: 5/3/2012
  • Series: Strategic Success
  • Sold by: Barnes & Noble
  • Format: eBook
  • Pages: 256
  • File size: 3 MB

Meet the Author

Clive Marsh has held such positions as Head of Finance & MIS, Director of Commercial Services, Director of Business Development and Divisional Manager of Corporate Services for companies such as Shell, Mobil, IBM UK, Cap Gemini and Ernst & Young.

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Table of Contents

Online resources ix

Introduction 1

1 Types of business structure and their finance 4

Sole proprietors 5

Partnerships: general and limited liability 6

Corporations 8

A company limited by shares 8

Limited companies 8

Public limited companies 9

Summary 9

2 The role of the accounting and finance department 11

Financial accounting, payroll, budgeting, management accounting, taxation, treasury 11

Accounting and finance department relationships 17

Summary 18

3 Accounting and financial statements 19

Double entry system and ledgers 19

Trial balance 24

Profit-and-loss account 25

Balance sheet 25

Classification of assets and liabilities 26

Source and application of funds statements 27

Principles: matching, accruals, deferrals, consistency, conservatism, accounting periods, materiality, going-concern concept, form and substance, full disclosure and clarity 29

Accounting and the environment 33

Neuroscience and accounting 33

Summary 34

4 Analysis and financial ratios 35

Ratio analysis 36

Gross profit percentage 38

Net profit percentage 38

Current ratio 39

Liquidity ratio 40

Stock-turnover ratio 40

Debtors' days 41

Fixed assets turnover ratio 42

Gearing ratio 43

Return on capital employed ratio 43

Return on equity: earnings per share 44

The price-earnings ratio (PER) 45

Earnings-yield 45

Dividend cover 45

Dividend yield 46

Summary 46

5 Planning and budgeting 48

The planning and budgeting process 49

Departmental budgets and variance analysis 51

Key budgets: sales, production, materials, labour, overheads, capital 51

Some key departmental budgets 55

The direct materials budget 59

Capital budgets 64

Capital rationing 67

Summary 69

6 Product and service costing and pricing 70

Types of cost: fixed, variable, semi-variable 70

Total cost and unit costs 72

Contribution, break-even point and marginal costing 73

Absorption costing - standard costing 78

Activity-based costing (ABC) 83

Selling prices and the sales mix 84

Summary 88

7 Setting selling prices and marketing strategies 89

Pricing strategies 92

Summary 96

8 Investment appraisal 98

Relevant cash flow 98

Pay-back period 100

Return on capital 101

Accounting rate of return (ARR) 102

Discounted-cash-flow and net present value 103

The internal rate of return (IRR) 106

Capital rationing 108

Summary 110

9 Finance, funding and working capital 111

Finance and working capital 111

Short-term funds: overdrafts, short-term loans, invoice finance, trade credit, managing stocks 112

Leases: short term - long term 118

Term funding and long-term finance: optimal gearing, equity funds, ordinary shares, preference shares, debentures, bonds, convertibles, notes, subordinated debt, Eurobonds, commercial mortgages, venture capital, derivatives 123

Export finance: bills of exchange, letters of credit, export credit guarantees 130

Using retained earnings as a source of funds 131

Bank relationships 132

Covenants 135

Financing entrepreneurial thinking and venture capitalists 136

Interest-rate risk 138

Financial markets 140

Summary 141

10 International transactions and currency risk 142

Buying or selling foreign currency 142

Foreign exchange risks 144

Foreign currency accounts 146

Forward exchange contracts 147

Hedging using the money market 148

Currency futures 148

Currency options 150

Currency swaps 151

Invoicing in domestic currency 153

Advance payment 153

Matching 153

Intra-group trading 154

Export invoice finance 154

Single Euro Payments Area Direct Debit Scheme 154

Summary 155

11 Company taxation and financial management 156

Direct and indirect taxation 157

Taxes on companies and corporations 159

VAT and GST 160

Taxes on the earnings of employees 162

Global tax planning 163

Double-taxation relief 164

Transfer pricing 164

Bringing taxation into the decision-making process 165

Taxation and the economy: future trends in tax collection 166

Summary 168

12 The value of a business 169

Building value 169

Methods of valuing a business 171

Summary 179

13 Financial strategy 180

Elements of a financial strategy 181

Strategic financial management 182

Summary 189

14 The cost of capital 191

The weighted average cost of capital (WACC) 192

The marginal cost of capital 192

The cost of ordinary share capital 192

Dividend growth model 195

Capital-asset-pricing model (CAPM) 195

Summary 196

15 Dividend policy 197

Influences in dividend policy 198

Dividend policy theories 199

Ways of paying dividends 200

Summary 202

16 Case studies 203

Case 1 Misuse of short-term funds with disastrous consequences 205

Case 2 Foreign exchange hedging v speculation 207

Case 3 Stock valuations and profits 209

Case 4 Bank loans and covenants 211

Case 5 Separating money transmission from a lending bank 213

Case 6 Credit ratings and fundamental analysis 215

Case 7 Advantages and disadvantages of internal charging 217

Case 8 Marginal costing v full absorption costing 220

Case 9 Overtrading: profits but no cash 221

Case 10 Integrating the planning and budgeting process, leading to outsourcing 223

Case 11 Government deficits and cost cutting 227

Case 12 A 5 per cent increase in sales is generally worth more than a 5 per cent reduction in costs 229

Case 13 Large capital projects and cost control: critical path analysis and integration with mainstream accounts 231

Case 14 A mass of figures just makes life more complicated 233

Case 15 High levels of fixed costs when income is variable can cause failure 234

Case 16 Interest rates and inflation 236

Appendices 239

Index 241

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