The Essentials of Finance and Accounting for Nonfinancial Managers

As a department manager, the last thing you want to think about is numbers. But the truth is, that's the only thing your executives and senior managers are thinking about so it's crucial to understand key financial information like balance sheets, income statements, cash flow statements, budgets and forecasts, and annual reports. With over 40,000 copies sold, "The Essentials of Finance and Accounting for Nonfinancial Managers" has long provided readers with insight into the financial fundamentals. It demystifies the role accounting and finance play in a corporation, demonstrates how financial decisions reflect business goals, and shows how managers can connect corporate financial information directly to their own strategies and actions. Now revised to reflect new accounting and financial standards, the second edition includes: strategies for getting your share of the budget; new case studies and practice sessions; an explanation of Sarbanes-Oxley and its relevance to nonfinancial managers; how to manage cash flow in tough times; fraud detection tools; and, an expanded glossary including up-to-the-minute business concepts and terminology. Contents......Page 4 Introduction......Page 6 Organization of the Book......Page 8 Additional Background......Page 13 Accounting Defined......Page 14 Generally Accepted Accounting Principles......Page 15 Financial Analysis......Page 16 Some Additional Perspectives on the Planning Process......Page 18 Part 1: Understanding Financial Information......Page 22 1. The Balance Sheet......Page 24 Expenses and Expenditures......Page 27 Assets......Page 28 Important Accounting Concepts Affecting the Balance Sheet......Page 35 Liabilities......Page 41 Stockholders’ Equity......Page 42 Total Liabilities and Stockholders’ Equity......Page 45 Additional Balance Sheet Information......Page 46 Analysis of the Balance Sheet......Page 49 2. The Income Statement......Page 60 Analysis of the Income Statement......Page 65 3. The Statement of Cash Flows......Page 69 Sources of Funds......Page 70 Uses of Funds......Page 73 Analyzing the Statement of Cash Flows......Page 76 4. Generally Accepted Accounting Principles: A Review and Update......Page 80 Historical Monetary Unit......Page 81 Quantifiable Items or Transactions......Page 82 Significant Accounting Issues......Page 83 5. The Annual Report and Other Sources of Incredibly Valuable Information......Page 88 The Annual Report......Page 89 Modern-Day Activists......Page 108 The 10-K Report......Page 109 The Proxy Statement......Page 111 Other Sources of Information......Page 112 The Securities and Exchange Commission......Page 113 Part 2: Analysis of Financial Statements......Page 116 Statistical Indicators......Page 118 Financial Ratios......Page 119 Liquidity Ratios......Page 121 Ratios of Working Capital Management......Page 124 Measures of Profitability......Page 133 Financial Leverage Ratios......Page 140 7. Using Return on Assets to Measure Profit Centers......Page 147 Assets......Page 148 Revenue......Page 150 Return on Assets: Its Components......Page 151 Problems That Arise from Cost Allocation......Page 158 Effect on Profits of Different Cost Allocation Issues......Page 161 Part 3: Decision Making for Improved Profitability......Page 170 9. Analysis of Business Profitability......Page 172 Fixed Costs......Page 174 Development of Variable-Cost Estimates......Page 175 Breakeven Calculation......Page 177 Variance Analysis......Page 186 What Is Analyzed?......Page 194 Why Are These Opportunities Analyzed So Extensively?......Page 195 Discounted Cash Flow......Page 197 Present Value......Page 200 Discounted Cash Flow Measures......Page 202 Risk......Page 207 Capital Expenditure Defined......Page 209 Characteristics of a Quality Forecast......Page 210 Establishing the ROI Target......Page 214 Analytical Simulations......Page 217 Comprehensive Case Study......Page 220 Part 4: Additional Financial Information......Page 226 11. Financing the Business......Page 228 Debt......Page 229 Equity......Page 238 Some Guidance on Borrowing Money......Page 240 12. Business Planning and the Budget......Page 245 S.W.O.T. Analysis......Page 246 Planning......Page 247 Significant Planning Guidelines and Policies......Page 250 Some Additional Issues......Page 252 A Guide to Better Budgets......Page 253 Preparation of the Budget......Page 255 13. Selected Business Readings......Page 258 Profitability During Tough Times......Page 259 Do the Right Thing......Page 262 Appendixes......Page 265 A......Page 294 B......Page 296 C......Page 298 D......Page 302 E......Page 303 F......Page 304 G......Page 305 I......Page 306 L......Page 307 O......Page 308 P......Page 309 R......Page 310 S......Page 311 V......Page 312 Z......Page 313 B......Page 314 C......Page 315 E......Page 316 G......Page 317 M......Page 318 P......Page 319 S......Page 320 Z......Page 321 Contents 4 Introduction 6 Organization of the Book 8 Additional Background 13 Accounting Defined 14 Generally Accepted Accounting Principles 15 Financial Analysis 16 Some Additional Perspectives on the Planning Process 18 Part 1: Understanding Financial Information 22 1. The Balance Sheet 24 Expenses and Expenditures 27 Assets 28 Important Accounting Concepts Affecting the Balance Sheet 35 Liabilities 41 Stockholders’ Equity 42 Total Liabilities and Stockholders’ Equity 45 Additional Balance Sheet Information 46 Analysis of the Balance Sheet 49 2. The Income Statement 60 Analysis of the Income Statement 65 3. The Statement of Cash Flows 69 Sources of Funds 70 Uses of Funds 73 Statement of Cash Flows 76 Financial Practice Review 76 Analyzing the Statement of Cash Flows 76 4. Generally Accepted Accounting Principles: A Review and Update 80 The Fiscal Period 81 The Going Concern Concept 81 Historical Monetary Unit 81 Conservatism 82 Quantifiable Items or Transactions 82 Consistency 83 Full Disclosure 83 Materiality 83 Significant Accounting Issues 83 5. The Annual Report and Other Sources of Incredibly Valuable Information 88 The Annual Report 89 Modern-Day Activists 108 The 10-K Report 109 The Proxy Statement 111 Other Sources of Information 112 The Securities and Exchange Commission 113 Part 2: Analysis of Financial Statements 116 6. Key Financial Ratios 118 Statistical Indicators 118 Financial Ratios 119 Liquidity Ratios 121 Ratios of Working Capital Management 124 Measures of Profitability 133 Financial Leverage Ratios 140 7. Using Return on Assets to Measure Profit Centers 147 Assets 148 Revenue 150 After-Tax Cash Flow (ATCF) 151 Return on Assets: Its Components 151 8. Overhead Allocations 158 Problems That Arise from Cost Allocation 158 What About the IRS and GAAP? 161 Effect on Profits of Different Cost Allocation Issues 161 Part 3: Decision Making for Improved Profitability 170 9. Analysis of Business Profitability 172 Fixed Costs 174 Variable Costs 175 Development of Fixed-Cost Estimates 175 Development of Variable-Cost Estimates 175 Breakeven Calculation 177 Variance Analysis 186 10. Return on Investment 194 What Is Analyzed? 194 Why Are These Opportunities Analyzed So Extensively? 195 Discounted Cash Flow 197 Present Value 200 Discounted Cash Flow Measures 202 Risk 207 Capital Expenditure Defined 209 The Cash Flow Forecast 210 Characteristics of a Quality Forecast 210 Establishing the ROI Target 214 Analytical Simulations 217 Comprehensive Case Study 220 Part 4: Additional Financial Information 226 11. Financing the Business 228 Debt 229 Equity 238 Some Guidance on Borrowing Money 240 12. Business Planning and the Budget 245 S.W.O.T. Analysis 246 Planning 247 Significant Planning Guidelines and Policies 250 Some Additional Issues 252 A Guide to Better Budgets 253 Preparation of the Budget 255 13. Selected Business Readings 258 Profitability During Tough Times 259 Do the Right Thing 262 Appendixes 265 Glossary 294 A 294 B 296 C 298 D 302 E 303 F 304 G 305 H 306 I 306 L 307 M 308 N 308 O 308 P 309 Q 310 R 310 S 311 T 312 V 312 W 313 Z 313 Index 314 A 314 B 314 C 315 D 316 E 316 F 317 G 317 H 318 I 318 J 318 K 318 L 318 M 318 N 319 O 319 P 319 Q 320 R 320 S 320 T 321 U 321 V 321 W 321 Z 321 9780814416242 AMACOM Books Organization of the Book -- Additional Background -- Accounting Defined -- Generally Accepted Accounting Principles -- Financial Analysis -- Some Additional Perspectives on the Planning Process -- -- pt. 1 Understanding Financial Information -- -- 1. The Balance Sheet -- Expenses and Expenditures -- Assets -- Important Accounting Concepts Affecting the Balance Sheet -- Liabilities -- Stockholders' Equity -- Total Liabilities and Stockholders' Equity -- Additional Balance Sheet Information -- Analysis of the Balance Sheet -- -- 2. The Income Statement -- Analysis of the Income Statement -- -- 3. The Statement of Cash Flows -- Sources of Funds -- Uses of Funds -- Statement of Cash Flows -- Financial Practice Review -- Analyzing the Statement of Cash Flows -- -- 4. Generally Accepted Accounting Principles: A Review and Update -- The Fiscal Period -- The Going Concern Concept -- Historical Monetary Unit Conservatism -- Quantifiable Items or Transactions -- Consistency -- Full Disclosure -- Materiality -- Significant Accounting Issues -- -- 5. The Annual Report and Other Sources of Incredibly Valuable Information -- The Annual Report -- The 10-K Report -- The Proxy Statement -- Other Sources of Information -- The Securities and Exchange Commission -- -- pt. 2 Analysis of Financial Statements -- -- 6. Key Financial Ratios -- Statistical Indicators -- Financial Ratios -- Liquidity Ratios -- Ratios of Working Capital Management -- Measures of Profitability -- Financial Leverage Ratios -- -- 7. Using Return on Assets to Measure Profit Centers -- Assets -- Revenue -- After-Tax Cash Flow (ATCF) -- Return on Assets: Its Components -- -- 8. Overhead Allocations -- Problems That Arise from Cost Allocation -- What About the IRS and GAAP? -- Effect on Profits of Different Cost Allocation Issues -- -- pt. 3 Decision Making for Improved Profitability 9. Analysis of Business Profitability -- Chart of Accounts -- Fixed Costs -- Variable Costs -- Development of Fixed-Cost Estimates -- Development of Variable-Cost Estimates -- Breakeven Calculation -- Variance Analysis -- -- 10. Return on Investment -- What Is Analyzed? -- Why Are These Opportunities Analyzed So Extensively? -- Discounted Cash Flow -- Present Value -- Discounted Cash Flow Measures -- Risk -- Capital Expenditure Defined -- The Cash Flow Forecast -- Characteristics of a Quality Forecast -- Establishing the ROI Target -- Analytical Simulations -- Comprehensive Case Study -- -- pt. 4 Additional Financial Information -- -- 11. Financing the Business -- Debt -- Equity -- Some Guidance on Borrowing Money -- -- 12. Business Planning and the Budget -- S.W.O.T. Analysis -- Planning -- Significant Planning Guidelines and Policies -- Some Additional Issues -- A Guide to Better Budgets -- Preparation of the Budget -- -- 13. Selected Business Readings -- Profitability During Tough Times -- Do the Right Thing. They say that numbers don't lie, but what if you can't even read them? Discover how great managers use financial data to guide decisions.Financial analysis reports, budgeting reports, forecasting and measuring reports--sometimes they all run together, don't they? The Essentials of Finance and Accounting for Nonfinancial Managers is here to help.This new edition of a business classic demystifies finance and accounting and gives managers the tools they need to make better decisions.Complete with fresh insights, case studies, and street-level exercises to help non-numbers people master the numbers game, this guide reveals how to:Understand the fundamentals of financial analysis, budgeting, and forecastingInterpret balance sheets, income/cash flow statements, and annual reportsSift through conflicting data to find the most relevant figuresLocate key information about competitors and suppliersAnalyze variances and calculate break-even points and other vital measuresThe numbers are too important to allow others to translate for you. The Essentials of Finance and Accounting for Nonfinancial Managers shows you how to read them yourself.Imagine the impact on future decisions when you grasp not only what the numbers mean but can use that insight to drive your business forward.

As a department manager, the last thing you want to think about is numbers. But the truth is, that’s the only thing your executives and senior managers are thinking about so it’s crucial to understand key financial information like balance sheets, income statements, cash flow statements, budgets and forecasts, and annual reports.

With over 40,000 copies sold, The Essentials of Finance and Accounting for Nonfinancial Managers has long provided readers with insight into the financial fundamentals. It demystifies the role accounting and finance play in a corporation, demonstrates how financial decisions reflect business goals, and shows how managers can connect corporate financial information directly to their own strategies and actions. Now revised to reflect new accounting and financial standards, the second edition includes:

• Strategies for getting your share of the budget

• New case studies and practice sessions

• An explanation of Sarbanes-Oxley and its relevance to nonfinancial managers

• How to manage cash flow in tough times

• Fraud detection tools

• An expanded glossary including up-to-the-minute business concepts and terminology

• And more

Based on the bestselling AMA seminar, a nuts-and-bolts guide to the dollars-and-cents issues that drive your organization! As a department manager, the last thing you want to think about is numbers. But the truth is, thatÆs the only thing your executives and senior managers are thinking about so itÆs crucial to understand key financial information like balance sheets, income statements, cash flow statements, budgets and forecasts, and annual reports. With over 40,000 copies sold, The Essentials of Finance and Accounting for Nonfinancial Managers has long provided readers with insight into the Provides readers with insight into the financial fundamentals. This title demystifies the role accounting and finance play in a corporation, demonstrates how financial decisions reflect business goals, and shows how managers can connect corporate financial information directly to their own strategies and actions. "Filled with crystal-clear examples, the book helps you understand: balance sheets and income/cash flow statements; annual reports; fixed-cost and variable-cost issues; financial analysis, budgeting, and forecasting; and much more"--Back cover