Finance and Accounting for Non-Financial Managers Course

of this information and how it is devel­oped is essential for the intelligent use of financial statements.

The financial statements that are discussed in Part 1 are:

• The balance sheet
• The income statement
• The statement of cash flows

Each statement is described, item by item. The discussion explains where the numbers belong and what they mean. The entire struc­ture of each financial statement will be described so that you will be able to understand how the financial statements interrelate and what information each of them conveys.

Part 1 also contains a Module on how to read and understand an annual report. The benefits of doing so are numerous. They include:

• Understanding the reporting responsibilities of a public company
• Further understanding the accounting process
• Identifying and using information about competitors that is in the public domain

Managers always ask for more information about what they should look for as they read the financial statements. Along with a line-by-line explanation of each financial statement component, they now include a preliminary analysis of the story that the numbers are telling. The book answers the questions for most of the numbers: What business conclusions can I reach by reading these financial statements? What key “red flags” should jump out at me?

Each of these red flags is identified:

• Questions you should ask the financial staff
• the key issues and action items that need to be addressed are discussed and serve as an analytical bridge between reading the financial statements and the more comprehensive analysis of the numbers in Module 6, Key Financial Ratios.

Part 2: Analysis of Financial Statements, Modules 6 through 8

Part 2 focuses on the many valuable analyses that can be per­formed using the information that was learned in Part 1. Business management activities can essentially be divided into two basic categories:

• Measuring performance
• Making decisions

Modules 6 through 8 explain how to measure and evaluate the company’s performance, its strategic business units, and even its products.

Financial ratios and statistical metrics are very dynamic tools. This section has been updated and enhanced to include analyses that will help the businessperson survive in our more complex eco­nomic environment. Technology has changed the way we do busi­ness. This section includes discussions of the customer interface, supply-chain management, global sourcing, and financial mea­surement and controls.

Now that we have learned how to read and understand finan­cial statements, we can also understand how they are prepared and what they mean. Part 2 identifies management tools that can help us use the information in financial statements to analyze the company’s performance. The ratios that will be covered describe the company’s:

• Liquidity
• Working capital management
• Financial leverage (debt)
• Profitability and performance

Financial turmoil from 2007 to 2010 has resulted in the loss of millions of jobs in the United States. Most of these jobs will not return to their previous form. Companies are focusing on measur­ing how much business revenue they can achieve with a minimal increase in the number of employees.

With the support of technology and improving business mod­els, revenue per employee is becoming a key metric of a company’s effectiveness and its ability to compete and achieve.

Part 3, Decision Making for Improved Profitability, Chapters 9 and 10

Part 3 discusses the key financial analysis techniques that manag­ers can use to make decisions about every aspect of their business. Financial analysis provides valuable tools for decision-making. However, managers must still make the decisions.

Part 3 also explores and analyzes fixed-cost versus variable-cost issues within the context of strategic planning. These include:

• Supply-chain management
• New product strategy
• Marketing strategy
• Product mix and growth strategies

Measuring the performance of profit centers is no longer a growing trend. It is now a necessary business practice and true of investment decision-making based upon cash flow forecast­ing techniques. The financial benefits of success are too valuable, and the financial penalties for failure are too severe for companies to make decisions without extensively examining each proposal’s cash flow issues. Part 3 explains the technique called discounted cash flow. Several measures are using this technique to determine the cash flow impact of proposed investment decisions:

• Internal rate of return
• Net present value
• Profitability index

The types of investments that are covered in this discussion are:

• Capital expenditures
• Research and development
• Acquiring other companies

Part 4: Additional Financial Information, Modules 11 through 13

Part 4 describes additional financial information that will benefit the businessperson in considerable detail. It includes dis­cussions of the planning process and the budget and why they are so important. It also covers the many ways in which the company may obtain financing. While this is not a direct responsibility of most management team members, knowledge of debt and equity markets and sources of corporate financing will be very beneficial for the business manager.