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Financial Literacy for Managers: Finance and Accounting for Better Decision-Making

Book Description

The language of business

In order to understand how your business is performing right now and to evaluate, assess, and devise new strategies to boost future performance, you need information. Financial statements are a critical source of the information you need.

In direct and simple terms, Richard A. Lambert, Miller-Sherrerd Professor of Accounting at the Wharton School of the University of Pennsylvania, demystifies financial statements and concepts and shows you how you can apply this information to make better business decisions for long-term profit. You will learn to use and interpret financial data; find out what we can learn from Pepsi, Krispy Kreme, General Motors, and other companies; learn how to evaluate investment strategies; and apply your financial know-how to develop a coherent business strategy.

Table of Contents

  1. The Wharton Executive Essentials Series
  2. Introduction
  3. Chapter 1: Your Company’s Financial Health and Performance: What Financial Statements Can Tell You
    1. The 3 Fundamental Financial Statements
      1. Balance Sheet
        1. Assets
          1. Valuing Assets
        2. Liabilities
        3. Owners' Equity
        4. What to Look For on the Balance Sheet
      2. Income Statement
      3. Cash Flow Statement
      4. Income versus Cash Flow
    2. How the 3 Financial Statements Relate
  4. Chapter 2: Impacting the Scorecard: How and When Actions and Events Affect the Numbers
    1. How Transactions and Events Affect the Financial Statements
      1. End of the Period Adjusting Entries
      2. Keep Taxes in Mind
    2. Compiling the Financial Statements
  5. Chapter 3: Using the Income Statement: Revenues, Expenses, and Profits
    1. Getting Detailed Disaggregate Data
    2. Benchmarks
    3. Assessing Performance, Starting with Revenues
      1. Accounting and Measurement Issues with Revenues
      2. Analyze Credit Sales to Determine Real Revenue
      3. Delivering the Product or Service: How Bundling Can Affect Revenues
    4. Expenses and Profitability
      1. Why Analyzing Margins Is Critical
      2. Accounting and Measurement Issues with Expenses
        1. How Depreciation Affects the Income Statement
        2. Accounting Rules Are Biased against R&D and Other Intangibles
      3. Nonrecurring Items
  6. Chapter 4: Utilizing and Financing Your Assets Efficiently: ROA, ROE, and Leverage
    1. Operating Performance and Return on Assets
      1. A Benchmark for ROA: Weighted Average Cost of Capital
      2. Improving Return on Assets
      3. Turnover of Specific Assets
        1. Accounts Receivable
        2. Inventory
      4. Accounting and Measurement Issues with Assets
    2. Capital Structure and ROE
      1. A Benchmark for ROE: Cost of Equity Capital
      2. Comparing ROA and ROE
      3. How Much Debt?
      4. Accounting and Measurement Issues with Debt
  7. Chapter 5: Using Cost Information in Decision Making: Know How Your Costs Behave
    1. Cost-Volume-Profit (CVP) Analysis
    2. Special Orders and Classes of Customers
    3. Resource Constraints
    4. Allocated Costs
    5. Why Sunk Costs Are Irrelevant (or Should Be)
  8. Chapter 6: Evaluating Investment Opportunities: Discounted Cash Flow Analysis
    1. A Framework for Calculating the Economic Value Created by Your Strategic Decisions
    2. Applying Present-Value Techniques to an Investment Decision
      1. Inflation
      2. Taxes
    3. Higher-Level Strategic Decisions
      1. Project Revenues
      2. Forecast the Future Expenses
      3. Working Capital
      4. Interactions with Other Projects
      5. Problems in Choosing the Discount Rate
      6. Optimism, Bias, and Sensitivity Analysis
  9. Conclusion
  10. Acknowledgments
  11. Appendix: More on the Cash Flow Statement: The Indirect Method
  12. About the Author
    1. About Wharton Digital Press
    2. About The Wharton School
    3. Wharton on Finance
  13. Copyright and Credits
    1. © 2012 by Richard A. Lambert
    2. The language of business
  14. Endnotes