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

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



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Product Details

ISBN-13: 9781422144114
Publisher: Harvard Business Review Press
Publication date: 02/19/2013
Edition description: Revised
Pages: 304
Sales rank: 94,979
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

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