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Overview
A source of invaluable expert advice on all the essential aspects of financial management within the context of running a business, 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. This book explains financial literacy in the context of management, showing how improved awareness of finances can lead to increased value creation and protection for your business. Aimed at the practicing business manager, Financial Management for Non-Financial Managers includes case studies, spreadsheets and worked examples to accompany key skills and practices explained in the book.
Online supporting resources for this book online template spreadsheets for planning, budgeting and variance analysis.
Product Details
| ISBN-13: | 9780749464677 |
|---|---|
| Publisher: | Kogan Page, Ltd. |
| Publication date: | 05/29/2012 |
| Series: | Strategic Success |
| Pages: | 256 |
| Product dimensions: | 5.40(w) x 8.40(h) x 0.70(d) |
About the Author
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