Finance for Nonfinancial Managers, Second Edition (Briefcase Books Series)

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• Introduction ix 1. Counting the Beans: Why Good Financial InformationIs Critical to You 1Managing a Company in Today’s Business Environment 1The Role of the Finance Department 4The Wonder Widget Company Is Our Guide 7The “Rules” of Financial Reporting 8The Relationship of Finance and Accounting tothe Other Departments 10Manager’s Checklist for Chapter 1 112. The Structure and Interrelationship of Financial Statements 13Tracking a Company’s Lifecycle 15Accounting Is Like a Football Game on Your DVR 16The Chart of Accounts: A Collection of Buckets 20The General Ledger: Balancing the Buckets 23Accrual Accounting: Say What? 25The Principal Financial Statements Defined 27Manager’s Checklist for Chapter 2 293. The Balance Sheet: A Basic Summary of Value and Ownership 31Assets and Ownership: They Really Do Balance! 31Current Assets: Liquidity Makes Things Flow 33Fixed Assets: Property and Possessions 39Other Assets: The “Everything Else” Category 40Current Liabilities: Repayment Is Key 41Long-Term Liabilities: Borrowed Capital 44Ownership Comes in Various Forms 45Capital Stock Comes in Several Flavors 46Using This Report Effectively 48Manager’s Checklist for Chapter 3 484. The Income Statement: The Flow of Progress 51They Say Timing Is Everything—And They're Right! 51Sales: Grease for the Engine 55Cost of Sales: What It Takes to Earn the Sale 55Gross Profit: The First Measure of Profitability 58Operating Expenses: Running the Business 58Operating Income: The Basic Business Bottom Line 60EBITDA—He Bit Who? 61Other Income and Expenses: Not Just Odds and Ends 62Income Before Taxes, Income Taxes, and Net Income 63Earnings per Share, Before and After Dilution—What? 63Using This Report Effectively 66Manager’s Checklist for Chapter 4 665. Profit vs. Cash Flow: What’s the Difference—and Who Cares? 67The Cash Flow Cycle 68Cash Basis vs. Accrual Basis 74Net Profit vs. Cash Flow in Your Financial Reports 75Manager’s Checklist for Chapter 5 786. The Statement of Cash Flow: Tracking the King 81Beginning Where the Income Statement Ends 83Cash from Operations: Running the Business 86Cash for Investing: Building the Business 90Cash from Financing: Capitalizing the Business 92Using This Report Effectively 94Manager’s Checklist for Chapter 6 957. Key Performance Indicators: Finding the“Hidden” Information 97What Are KPIs? Do They Mix with Water? 98Measures of Financial Condition and Net Worth 98Measures of Profitability 103Measures of Financial Leverage 106Measures of Productivity Metrics 109Trend Reporting: Using History to Predict the Future 113Manager’s Checklist for Chapter 7 1178. Cost Accounting: A Really Short Course inManufacturing Productivity 119The Purpose of Cost Accounting—Strictly for Insiders 120Fixed and Variable Expenses in the Factory 124Controllable and Uncontrollable Expenses 127Standard Costs—Little Things Mean a Lot 129Manufacturing Cost Variances: Analysis for Action 130Manager’s Checklist for Chapter 8 1339. Good Investment or Bad? How Do You Decide? 135Capital Investment: A Game of Choices, Risks, andHoped-For Outcomes 136Return on Investment: The Concept and the Purpose 137Payback Period: A Quick and Easy Way to Understandthe Approach 138The Time Value of Money: Today and in the Future 139Discounted Cash Flow: Evaluating Long-Term Investments 141Weighted Average Cost of Capital: Enhancing theReturn to Shareholders 143Internal Rate of Return: Deciding What ReturnIs Good Enough 145Risk Management: Assessing the Probability ThatWe Might Be Wrong 146Manager’s Checklist for Chapter 9 14710. Get to Breakeven First! 149What Does “Breakeven Point” Really Mean? 150Why Is This a Critical Factor in Profitability? 151How to Calculate Breakeven for a New Product 152What to Do If You Don’t Like the Answer 155Manager’s Checklist for Chapter 10 15611. Business Planning: Creating the Future You Want,Step by Step 159Why Take Time to Plan? 159Strategic Planning vs. Operational Planning 162Vision and Mission: The Starting Point 164Strategy: Setting Direction 165Long-Term Goals: The Path to the Mission 167Short-Term Goals and Milestones: The Operating Plan 168Manager’s Checklist for Chapter 11 17412. The Annual Budget: Financing Your Plans 177Tools for Telling the Future: Budgets, Forecasts,Projections, and Tea Leaves 178How to Budget for Revenues: The “Unpredictable”Starting Point 179Budgeting Costs: Understanding RelationshipsThat Affect Costs 182The Budgeting Process: Trial and Error 184Flexible Budgets: Whatever Happens, We’ve Got aBudget for It 187How to Live Within Your Budget 191Variance Reporting and Taking Action 192The Capital Expenditure Budget 193The Cash Flow Budget 194Integrating the Entire Operating Budget 195Manager’s Checklist for Chapter 12 19613. Financing the Business: Understanding the Debtvs. Equity Options 199The Strategy of Borrowing Money 199How a Business Gets Financed: In the Beginningand Over Time 202Short-Term Debt: Balancing Working Capital Needs 203Long-Term Debt: Semipermanent Capital or AssetAcquisition Financing 209Convertible Debt: The Transition from Debt to Equity 213Capital Stock: Types and Uses 214Manager’s Checklist for Chapter 11 21814. Attracting Outside Investors: The Entrepreneur’s Path 221The Start-Up Company: Seed Money and Its Sources 223Professional Investors: Angels on a Mission 224Venture Capitalists: What You Need to Know toAttract Them 226The Initial Public Offering: Heaven or Hell? 230Strategic Investors: The Path to a Different Party 232Acquisition: The Strategic Exit 233Manager’s Checklist for Chapter 14 236Index