Key Management Ratios: The 100+ Ratios Every Manager Needs To Know(Financial Times Series)

With over 33,000 copies sold, __Key Management Ratios__ is a market “classic”. This new edition is re-packaged with a new jacket design to revitalise the Key Management brand and new two-colour internals make it more readable and visually appealing. __Key Management Ratios__is an antidote to any fear of finance. Drawing data from 200 companies worldwide, the book brings clarity and simplicity to its explanation of every measure and shows how they all link together to drive your business. From cash flow and profit to ROI and ROTA, its unique approach remains as classic as ever, bringing a simple and visual understanding to a complex subject. Cover 1 Key management ratios 4 Contents 8 Foreword 12 Acknowlegements 13 Key for symbols 14 Part One Foundations 16 Background 18 Why do you need this book? 19 The form and logic 19 Method 19 The philosophy 20 Excitement 20 Data that make sense 21 Financial statements 24 Introduction 26 The balance sheet 27 Balance sheet structure – fixed assets 31 Balance sheet structure – liabilities 33 Summary 37 Balance sheet terms 38 Introduction 39 The terms used 39 Profit and loss account 48 Introduction 49 Working data 55 Part Two Operating performance 60 Measures of performance 62 Relationships between the balance sheet and profit and loss account 63 The ratios ‘return on total assets’ and ‘return on equity’ 65 Balance sheet layouts 67 Operating performance 72 Return on investment (ROI) 74 Return on equity (ROE) 75 Return on total assets (ROTA) 77 Standards of operating performance 79 Performance drivers 94 Operating performance 95 Operating profit model 101 Part Three Corporate liquidity 110 Cash flow cycle 112 Corporate liquidity 114 The cash cycle 115 Measures of liquidity – long and short analysis 125 Liquidity 130 Short-term liquidity measures 132 Current ratio 132 Quick ratio 135 Working capital to sales ratio 137 Working capital days 139 Financial strength 142 Interest cover 143 ‘Debt to equity’ ratio (D/E) 145 Leverage 151 Summary 151 Cash flow 154 The cash flow statement 156 Sources and uses of funds – method 157 Opening and closing cash reconciliation 161 Long and short analysis 163 Financial reporting standards 167 Part Four Determinants of corporate value 170 Corporate valuation 172 Introduction 173 Share values 175 Financial leverage and corporate valuation 192 Introduction 193 Financial leverage 193 V chart 195 Market to book ratio 199 Growth 206 Growth 207 Analysis 211 Growth equilibrium 213 Application to acquisitions 217 Part Five Management decision-making 220 Cost, volume and price relationships 222 Introduction 224 Costing illustration 225 Contribution 229 Break-even (B/E) 235 Contribution to sales percentage (CPS) 239 Summary 253 Investment ratios 254 Introduction 256 Project appraisal – the problem 257 Project appraisal – steps to a solution (1) 259 Project appraisal – steps to a solution (2) 261 Project appraisal – present value (PV) 263 Project appraisal – internal rate of return (IRR) 267 Project appraisal – summary 269 Shareholder value added (SVA) 272 Introduction 274 Description 274 Approach to valuation (1) 279 Approach to valuation (2) 281 Value for the equity shareholders 287 Discount factor 289 Terminal (continuing) value 299 Complete model 301 Acquisition analysis 304 Introduction 306 Financial profile of Alpha Inc. 307 Financial profile of Beta Inc. 309 Acquisition – first offer 311 Acquisition impact on EPS 313 Shareholder effects – generalized 315 Summary of effects on shareholders 321 Revised offer 323 Relative versus absolute values 325 SVA models – Alpha Inc. and Beta Inc. 329 Addendum 331 Integrity of accounting statements 334 Introduction 336 Where we focus attention 336 Operating revenue enhancement 337 Methods of revenue enhancement – fictitious sales 340 Revenue enhancement – clues for detection 341 Operating cost 342 The balance sheet 345 The cash flow statement 349 Appendix 1: Special items 353 Appendix 2: Companies used in the sample 366 Appendix 3: Full set of ratio charts from sample companies 369 Appendix 4: Discounting and compounding tables 386 Glossary 394 Index 404

Financial measures are critical for business success and if you’re a manager, for your career. That may scare some people. But here’s the good news: there is a relatively small number of essential management ratios with which you can measure any aspect of business performance you need to. If you can master these, you will have a firm grip of business finance and need never be put off by the numbers again.

Key Management Ratios cuts straight to the measures that matter. It shows you what they are and explains exactly how they show just what’s going on in your company. Its clarity of explanation and unique visual presentation will help you quickly understand everything you need to know about business ratios.

THE CLEAREST GUIDE TO THE CRITICAL NUMBERS THAT DRIVE YOUR BUSINESS

With over 33,000 copies sold, Key Management Ratios is a market “classic”. This new edition is re-packaged with a new jacket design to revitalise the Key Management brand and new two-colour internals make it more readable and visually appealing. Key Management Ratios is an antidote to any fear of finance. Drawing data from 200 companies worldwide, the book brings clarity and simplicity to its explanation of every measure and shows how they all link together to drive your business. From cash flow and profit to ROI and ROTA, its unique approach remains as classic as ever, bringing a simple and visual understanding to a complex subject. Business ratios are the figures that provide management with targets and standards for their organisation. From earnings per share and cash flow to return on investment and sales to fixed assets ratios, this book guides managers through the key ratios at the heart of business practice