Key MBA Models

PART SIX

Finance

Finance provides a common language and set of tools that helps managers and the owners of capital understand each other. The former looks for money to help their business grow. The latter wants a return on the money and a clear understanding of the risks involved.

Of all the subjects in this book, finance has the potential to be the most confusing due to the many technical terms being used. Once you start reading through this section, you will find that much of finance, at least at this level, relies on basic arithmetic. Moreover, learning to interpret the results is, arguably, at least as important as knowing which figures to add or multiply together.

The foundational concept in finance is that money has earning capacity and, ...