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Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers

Book Description

Using the groundbreaking formula they introduced in their book Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean, Karen Berman and Joe Knight present the essentials of finance specifically for entrepreneurial managers.

Drawing on their work training tens of thousands of people at leading organizations worldwide, the authors provide a deep understanding of the basics of financial management and measurement, along with hands-on activities to practice what you are reading. You'll discover:

Why the assumptions behind financial data matter
- What income statements, balance sheets, and cash flow statements really reveal
- How to use ratios to assess your venture's financial health
- How to calculate return on your investments in your enterprise
- Ways to use financial information to do your own job better
- How to instill financial intelligence throughout your team

Authoritative and accessible, Financial Intelligence for Entrepreneurs empowers you to "talk numbers" confidently with colleagues, partners, and employees-- and fully understand how to use financial data to make better decisions for your business.

Table of Contents

  1. Title Page
  2. Copyright Page
  3. Dedication
  4. Table of Contents
  5. PREFACE
  6. Part One - The Art of Finance (and Why It Matters)
    1. 1 - What Is Financial Intelligence?
      1. UNDERSTANDING THE FOUNDATION
      2. UNDERSTANDING THE ART OF FINANCE
      3. UNDERSTANDING FINANCIAL ANALYSIS
      4. ROADBLOCKS TO FINANCIAL INTELLIGENCE
    2. 2 - A Primer on the Art of Finance
      1. DISCRETION ABOUT DEPRECIATION
      2. THE MANY METHODS OF VALUATION
    3. Part One - TOOLBOX
      1. FINANCING YOUR BUSINESS
      2. BUILDING A FINANCIAL STAFF
  7. Part Two - The (Many) Peculiarities of the Income Statement
    1. 3 - Profit Is an Estimate
      1. A (VERY) LITTLE ACCOUNTING
      2. THE PURPOSE OF THE INCOME STATEMENT
    2. 4 - Cracking the Code of the Income Statement
      1. READING AN INCOME STATEMENT
      2. ONE BIG RULE
    3. 5 - Revenue
      1. MURKY GUIDELINES
      2. POSSIBILITIES FOR MANIPULATION
    4. 6 - Costs and Expenses
      1. COST OF GOODS SOLD OR COST OF SERVICES
      2. OPERATING EXPENSES: WHAT’S NECESSARY?
      3. THE POWER OF DEPRECIATION AND AMORTIZATION
      4. ONE-TIME CHARGES: A YELLOW FLAG
    5. 7 - The Many Forms of Profit
      1. GROSS PROFIT: HOW MUCH IS ENOUGH?
      2. OPERATING PROFIT IS A KEY TO HEALTH
      3. NET PROFIT AND HOW TO FIX IT
    6. Part Two - TOOLBOX
      1. UNDERSTANDING VARIANCE
      2. CALCULATING PERCENT OF AND PERCENT CHANGE
  8. Part Three - The Balance Sheet Reveals the Most
    1. 8 - Understanding Balance Sheet Basics
      1. SHOWING WHERE THINGS STAND RIGHT NOW
      2. INDIVIDUALS AND BUSINESSES
      3. READING A BALANCE SHEET
    2. 9 - Assets
      1. TYPES OF ASSETS
    3. 10 - On the Other Side
      1. TYPES OF LIABILITIES
      2. OWNERS’ EQUITY
    4. 11 - Why the Balance Sheet Balances
      1. REASONS FOR BALANCE
    5. 12 - The Income Statement Affects the Balance Sheet
      1. THE EFFECT OF PROFIT ON EQUITY
      2. AND MANY OTHER EFFECTS
      3. ASSESSING YOUR COMPANY’S HEALTH
    6. Part Three - TOOLBOX
      1. “EMPLOYEES ARE OUR MOST VALUABLE ASSET” (OR ARE THEY?)
      2. EXPENSE? OR CAPITAL EXPENDITURE?
  9. Part Four - Cash Is King
    1. 13 - Cash Is a Reality Check
      1. WHY CASH IS KING
    2. 14 - Profit ≠ Cash (and You Need Both)
      1. PROFIT WITHOUT CASH
      2. CASH WITHOUT PROFIT
    3. 15 - The Language of Cash Flow
      1. TYPES OF CASH FLOW
    4. 16 - How Cash Connects with Everything Else
      1. RECONCILING PROFIT AND CASH
      2. A START-UP COMPANY
      3. A REALISTIC COMPANY
    5. 17 - Why Cash Matters
      1. THE POWER OF UNDERSTANDING CASH FLOW
    6. Part Four - TOOLBOX
      1. CASH ACCOUNTING
      2. FREE CASH FLOW
  10. Part Five - Ratios: Learning What the Numbers Are Really Telling You
    1. 18 - The Power of Ratios
      1. ACCOUNTING TRICKS
      2. ANALYZING RATIOS
    2. 19 - Profitability Ratios
      1. GROSS PROFIT MARGIN PERCENTAGE
      2. OPERATING PROFIT MARGIN PERCENTAGE
      3. NET PROFIT MARGIN PERCENTAGE
      4. RETURN ON ASSETS
      5. RETURN ON EQUITY
    3. 20 - Leverage Ratios
      1. DEBT-TO-EQUITY
      2. INTEREST COVERAGE
    4. 21 - Liquidity Ratios
      1. CURRENT RATIO
      2. QUICK RATIO
    5. 22 - Efficiency Ratios
      1. INVENTORY DAYS AND INVENTORY TURNOVER
      2. DAYS SALES OUTSTANDING
      3. DAYS PAYABLE OUTSTANDING
      4. PROPERTY, PLANT, AND EQUIPMENT TURNOVER
      5. TOTAL ASSET TURNOVER
    6. Part Five - TOOLBOX
      1. WHICH RATIOS ARE MOST IMPORTANT TO YOUR BUSINESS?
      2. THE POWER OF PERCENT OF SALES
      3. SUSTAINABLE GROWTH RATE
  11. Part Six - How to Calculate (and Really Understand) Return on Investment
    1. 23 - The Building Blocks of ROI
      1. FUTURE VALUE AND PRESENT VALUE
    2. 24 - Figuring ROI
      1. ANALYZING CAPITAL EXPENDITURES
      2. LEARNING THE THREE METHODS
      3. COMPARING THE THREE METHODS
    3. Part Six - TOOLBOX
      1. A STEP-BY-STEP GUIDE TO ANALYZING CAPITAL EXPENDITURES
  12. Part Seven - Applied Financial Intelligence: Working Capital Management
    1. 25 - The Magic of Managing the Balance Sheet
      1. THE ELEMENTS OF WORKING CAPITAL
    2. 26 - Your Balance Sheet Levers
      1. MANAGING DSO
      2. MANAGING INVENTORY
    3. 27 - Homing In on Cash Conversion
      1. THE CASH CONVERSION CYCLE
    4. Part Seven - TOOLBOX
      1. WORKING WITH YOUR BANKER
      2. ACCOUNTS RECEIVABLE AGING
  13. Part Eight - Creating a Financially Intelligent Company
    1. 28 - Financial Literacy, Transparency, and Your Business’s Performance
      1. BETTER COMPANIES
      2. TAKING IT TO THE TROOPS
    2. 29 - Financial Literacy Strategies
      1. TOOLS AND TECHNIQUES
    3. 30 - Putting Financial Intelligence to Work
      1. PATHS TO GROWTH
      2. GOING PUBLIC
    4. Part Eight - TOOLBOX
      1. OPEN-BOOK MANAGEMENT
      2. UNDERSTANDING SARBANES-OXLEY
  14. APPENDIX A - Sample Financials
  15. APPENDIX B - Exercises to Build Your Financial Intelligence
  16. APPENDIX C - Under Armour and eBay Financial Statements
  17. NOTES
  18. ACKNOWLEDGMENTS
  19. INDEX
  20. ABOUT THE AUTHORS