The Essentials of Finance and Accounting for Nonfinancial Managers

The Essentials of Finance and Accounting for Nonfinancial Managers

Author: Edward Fields
Pub Date: March 2016
Print Edition: $19.95
Print ISBN: 9780814436943
Page Count: 336
Format: Paper or Softback
Edition: Third Edition
e-Book ISBN: 9780814436950

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Excerpt

Introduction

This is a book for businesspeople. All decisions in a business organization are made in accordance with how they will affect the organization's financial performance and future financial health. Whether your background is in marketing, manufacturing, distribution, research and development, or the current technologies, you need financial knowledge and skills if you are to really understand your company's decision-making, financial, and overall management processes. The budget is essentially a financial process of prioritizing the benefits resulting from business opportunities and the investments required to implement those opportunities. An improved knowledge of these financial processes and the financial executives who are responsible for them will improve your ability to be an intelligent and effective participant.

The American economy has experienced incredible turmoil in the years since this book was first published. Before U.S. government intervention in 2008/2009, we were on the verge of our second “great depression.” We witnessed the demise of three great financial firms, Bear Stearns, Lehman Brothers, and AIG. Corporate bankruptcies were rampant, with General Motors, Chrysler, and most of the major airlines filing. The U.S. government lent the banks hundreds of billions of dollars to save the financial system, while approximately seven million Americans lost their jobs (and most of these jobs will never exist again; see Chapter 6, “Key Financial Ratios,” for a discussion of employee productivity trends). The cumulative value of real estate in this country declined by 40 percent; combining this with the 50 percent drop in the stock market, millions of Americans lost at least half of their net worth. Accounting scandals caused the downfall of many companies, the demise of some major CPA firms, and jail time for some of the principals involved. (Enron would not have happened had its CPA firm done the audit job properly. Bernard Madoff's Ponzi scheme could not have been maintained had his CPA firm not been complicit.) More than ever, business and organization managers require a knowledge of finance and accounting as a prerequisite to professional advancement. It is for this reason that the second edition included additional accounting and regulatory compliance information and introduced the stronger analytical skills that are necessary to navigate the global economic turmoil.

The depth of the 2008 recession intensified competitive pressures as companies struggled to survive and regain their financial health and profitability. As important and valuable as financial knowledge was prior to the crisis (and the writing of the second edition of this book), it is even more so now. This book distinguishes itself from similar finance and accounting books in many ways:

1. It teaches what accountants do; it does not teach how to do accounting. Businesspeople do not need to learn, nor are they interested in learning, how to do debits and credits. They do need to understand what accountants do and why, so that they can use the resulting information—the financial statements—intelligently.

2. It is written by a businessperson for other businesspeople. Throughout a lifetime of business, consulting, and training experience, I have provided my audiences with down-to-earth, practical, useful information. I am not an accountant, but I do have the knowledge of an intelligent user of financial information and tools. I understand your problems, and I seek to share my knowledge with you.

3. It emphasizes the business issues. Many financial books focus on the mathematics. This book employs mathematical information only when it is needed to support the business decision-making process.

4. It includes a chapter on how to read an annual report. This helps you to use the information that is available there, including the information required by Sarbanes-Oxley, to better understand your own company. Sarbanes-Oxley is legislation passed by Congress and enforced by the Securities and Exchange Commission. The governance information required by this act is highlighted and explained, and its impact is analyzed. This chapter also identifies a number of sources of information about your competition that are in the public domain and that may be of great strategic value.

5. It includes a great deal of information on how the finance department contributes to the profitability and performance of the company. The financial staff should be part of the business profitability team. This book describes what you should expect from them.

6. It contains many practical examples of how the information can be used, based upon extensive practical experience. It also provides a number of exercises, including several case studies, as appendices.

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