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

Book Description

As an HR manager, you're expected to use financial data to make decisions, allocate resources, and budget expenses. But if you're like many human resource practitioners, you may feel uncertain or uncomfortable incorporating financials into your day-to-day work.

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 HR experts.

Drawing on their work training tens of thousands of managers and employees 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 your company's income statement, balance sheet, and cash flow statement really reveal
· Which financials may be needed when you're developing a human capital strategy
· How to calculate return on investment
· Ways to use financial information to better support your business units and do your own job
· How to instill financial intelligence throughout your team

Authoritative and accessible, Financial Intelligence for HR Professionals, empowers you to "talk numbers" confidently with your boss, colleagues, and direct reports -- and understand how the financials impact your part of the 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 to HR)
    1. 1 - You Can’t Always Trust the Numbers
      1. THE ART OF FINANCE
      2. JUDGMENT CALLS
    2. 2 - Spotting Assumptions, Estimates, and Biases
      1. ACCRUALS AND ALLOCATIONS: LOTS OF ASSUMPTIONS AND ESTIMATES
      2. DISCRETION ABOUT DEPRECIATION
      3. THE MANY METHODS OF VALUATION
    3. 3 - Why Increase Your Financial Intelligence?
      1. THE BENEFITS OF FINANCIAL LITERACY
      2. HOW IT BENEFITS A COMPANY
      3. ROADBLOCKS TO FINANCIAL SAVVY
  7. Part Two - The (Many) Peculiarities of the Income Statement
    1. 4 - Profit Is an Estimate
      1. A (VERY) LITTLE ACCOUNTING
      2. THE PURPOSE OF THE INCOME STATEMENT
      3. THE PLAYERS AND WHAT THEY DO
      4. DUE DILIGENCE: NOT JUST FOR FINANCE ANYMORE
    2. 5 - Cracking the Code of the Income Statement
      1. READING AN INCOME STATEMENT
      2. ONE BIG RULE
    3. 6 - Revenue
      1. MURKY GUIDELINES
      2. POSSIBILITIES FOR MANIPULATION
    4. 7 - 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. PEOPLE COSTS IN THE SCHEME OF THINGS
    5. 8 - The Many Forms of Profit
      1. GROSS PROFIT: HOW MUCH IS ENOUGH?
      2. OPERATING PROFIT: A KEY TO HEALTH
      3. NET PROFIT AND HOW TO FIX IT
      4. BUDGET RESULTS MEETINGS
  8. Part Three - The Balance Sheet Reveals the Most
    1. 9 - Understanding Balance Sheet Basics
      1. SHOWING WHERE THINGS STAND RIGHT NOW
      2. INDIVIDUALS AND BUSINESSES
      3. READING A BALANCE SHEET
    2. 10 - Assets
      1. TYPES OF ASSETS
    3. 11 - On the Other Side
      1. TYPES OF LIABILITIES
      2. OWNERS’ EQUITY
    4. 12 - Why the Balance Sheet Balances
      1. REASONS FOR BALANCE
    5. 13 - The Income Statement Affects the Balance Sheet
      1. THE EFFECT OF PROFIT ON EQUITY
      2. AND MANY OTHER EFFECTS
      3. ASSESSING A COMPANY’S HEALTH
  9. Part Four - Cash Is King
    1. 14 - Cash Is a Reality Check
      1. WHY CASH IS KING
    2. 15 - Profit ≠ Cash (and You Need Both)
      1. PROFIT WITHOUT CASH
      2. CASH WITHOUT PROFIT
    3. 16 - The Language of Cash Flow
      1. TYPES OF CASH FLOW
    4. 17 - How Cash Connects with Everything Else
      1. RECONCILING PROFIT AND CASH
      2. A START-UP COMPANY
      3. A REALISTIC COMPANY
    5. 18 - Why Cash Matters
      1. THE POWER OF UNDERSTANDING CASH FLOW
  10. Part Five - Ratios: Learning What the Numbers Are Really Telling You
    1. 19 - The Power of Ratios
      1. ACCOUNTING TRICKS
      2. ANALYZING RATIOS
    2. 20 - 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. 21 - Leverage Ratios
      1. DEBT-TO-EQUITY
      2. INTEREST COVERAGE
    4. 22 - Liquidity Ratios
      1. CURRENT RATIO
      2. QUICK RATIO
    5. 23 - 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. REVENUE PER EMPLOYEE
  11. Part Six - How to Calculate (and Really Understand) Return on Investment
    1. 24 - The Building Blocks of ROI
      1. TIME VALUE OF MONEY
      2. FUTURE VALUE AND PRESENT VALUE
    2. 25 - Figuring ROI
      1. ANALYZING CAPITAL EXPENDITURES
      2. LEARNING THE THREE METHODS
      3. COMPARING THE THREE METHODS
      4. ROI IN HR
  12. Part Seven - Applied Financial Intelligence: Working Capital Management
    1. 26 - The Magic of Managing the Balance Sheet
      1. THE ELEMENTS OF WORKING CAPITAL
    2. 27 - Your Balance Sheet Levers
      1. MANAGING DSO
      2. MANAGING INVENTORY
    3. 28 - Homing In on Cash Conversion
      1. THE CASH CONVERSION CYCLE
  13. Part Eight - Creating a Financially Intelligent HR Department (and Organization)
    1. 29 - Financial Literacy, Transparency, and Corporate Performance
      1. BETTER COMPANIES
      2. TAKING IT TO THE TROOPS
    2. 30 - Financial Literacy Strategies
      1. A FINANCIALLY LITERATE HR DEPARTMENT
      2. AN ORGANIZATION-WIDE INITIATIVE
  14. APPENDIX A - Sample Financials
  15. APPENDIX B - Exercises to Build Your Financial Intelligence
  16. APPENDIX C - Kimberly-Clark and FedEx
  17. NOTES
  18. ACKNOWLEDGMENTS
  19. INDEX
  20. ABOUT THE AUTHORS