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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Introduction 1

Organization of the Book 3

Additional Background 9

Accounting Defined 10

Generally Accepted Accounting Principles 11

Financial Analysis 12

Some Additional Perspectives on the Planning Process 14

Part 1: Understanding Financial Information

1. The Balance Sheet 21

Expenses and Expenditures 23

Assets 25

Important Accounting Concepts Affecting the Balance Sheet 33

Liabilities 39

Stockholders' Equity 41

Total Liabilities and Stockholders' Equity 43

Additional Balance Sheet Information 44

Analysis of the Balance Sheet 47

A Point to Ponder 58

2. The Income Statement 60

Analysis of the Income Statement 65

3. The Statement of Cash Flows 70

Sources of Funds 71

Uses of Funds 74

Statement of Cash Flows 77

Analyzing the Statement of Cash Flows 78

4. Generally Accepted Accounting Principles: A Review and Update 82

The Fiscal Period 83 The Going Concern Concept 83

Historical Monetary Unit 83

Conservatism 84

Quantifiable Items or Transactions 85

Consistency 85

Full Disclosure 85

Materiality 86

Significant Accounting Issues 86

5. The Annual Report and Other Sources of Incredibly Valuable Information 91

The Annual Report 92

The Gilbert Brothers: The Original Shareholder Activists 108

Modern-Day Activists 112

The 10-K Report 113

The Proxy Statement 115

Other Sources of Information 116

The Securities and Exchange Commission 118

Part 2: Analysis of Financial Statements

6. Key Financial Ratios 123

Statistical Indicators 123

Financial Ratios 124

Liquidity Ratios 126

Ratios of Working Capital Management 130

Measures of Profitability 139

Financial Leverage Ratios 147

Revenue per Employee 153

Ratios: Quick and Dirty 155

7. Using Return on Assets to Measure Profit Centers 157

Assets 159

Revenue 161

After-Tax Cash Flow (ATCF) 161

Return on Assets: Its Components 162

A Business with No “Assets” 168

8. Overhead Allocations 170

Problems That Arise from Cost Allocation 170

What About the IRS and GAAP? 173

Effect on Profits of Different Cost Allocation Issues 173

Part 3: Decision Making for Improved Profitability

9. Analysis of Business Profitability 185

Chart of Accounts 187

Breakeven Calculation 191

Variance Analysis 203

10. Return on Investment 210

What Is Analyzed? 210

Why Are These Opportunities Analyzed So Extensively? 211

Discounted Cash Flow 213

Present Value 216

Discounted Cash Flow Measures 220

Risk 223

Capital Expenditure Defined 225

The Cash Flow Forecast 226

Characteristics of a Quality Forecast 226

Establishing the ROI Target 230

Analytical Simulations 233

Part 4: Additional Financial Information

11. Financing the Business 239

Debt 240

Equity 249

Some Guidance on Borrowing Money 251

12. Business Planning and the Budget 256

S.W.O.T. Analysis 257

Planning 258

Significant Planning Guidelines and Policies 261

Some Additional Issues 263

A Guide to Better Budgets 264

Preparation of the Budget 266

13. Final Thoughts 269

Profitability During Tough Times 270

Do the Right Thing 273

Appendix A. Financial Statement Practice 279

Appendix B. Finance and Accounting Terms 285

Appendix C. Comprehensive Case Study: Paley Products, Inc. 292

Appendix D. Ratio Matching Challenge 302

Appendix E. Comprehensive Case Study: Woodbridge Manufacturing 308

Appendix F. Comprehensive Case Study: Bensonhurst Brewery 314

Glossary 319

Index 339

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