The Essentials of Financial Analysis - Hardcover

WEAVER

Hardcover

ISBN 10: 007176836X ISBN 13: 9780071768368

Verlag: McGraw Hill, 2011

Inhaltsangabe

It's easier than you think to understand the financial reports you face every day . . . If your job focus is on managing employees and overseeing corporate affairs, financial analysis may sound like a foreign language to you. But, in today's competitive business environment, it is crucial that managers and business executives have a firm grasp of financial analysis. The Essentials of Financial Analysis simplifies an often difficult-to-understand topic so stakeholders ranging from employees to executives to investors can understand and discuss an organization's financial workings. The Essentials of Financial Analysis delivers practical, in-depth coverage on the key components of financial reporting, budgeting, and analysis to help you better relate to the numbers behind the business issues you face every day. By the time you turn the final page of this book, you will be able to command confident discussions on performance, investment, and other financial situations with members of your finance team and senior management. This hands-on book helps you make better business decisions by showing you how to structure financial analysis, as well as: Contribute to an organization's success and guide others companywide to make better financial decisions Reduce cost of capital and hurdle rates by selecting the financial markets, intermediaries, and instruments that work best for your company's financing needs Increase shareholder value by pursuing growth through capital investment, new products, mergers and acquisitions, joint ventures, and other strategies Your career success and the prosperity of your company depends on your ability to understand and act upon basic financial principles. With The Essentials of Financial Analysis, you can go inside the numbers and get a clear picture of where your company has been, where it is going, and how you can help it get there.

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The Essentials of Financial Analysis is a practical, in-depth survey of the key elements of financial reporting, budgeting, and analysis to help business managers with little or no background in finance relate to the numbers they deal with every day, boost their performance, and better lead their staff. The Essentials of Financial Analysis explains how to:

• Use a balance sheet, income statement, and cash flow statement to spotlight a company’s weaker areas and improve its financial efficiencies
• Implement strategic plans, operational budgets, and financial forecasts as competitive tools for direction setting, communication, and compensation
• Make capital-investment decisions that contribute to a company’s success

The Essentials of Financial Analysis has all the critical information you need to ensure your decisions are grounded in sound financial judgment. Whether you’re presenting financial results, executing performance comparisons, allocating resources, or budgeting expenses, it helps you transform your know-how into real results.

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THE ESSENTIALS OF FINANCIAL ANALYSIS

By SAMUEL C. WEAVER

The McGraw-Hill Companies, Inc.

Copyright © 2012 The McGraw-Hill Companies, Inc.
All rights reserved.

ISBN: 978-0-07-176836-8

Contents

Preface
PART ONE ACCOUNTING AND FINANCE FUNDAMENTALS
Chapter 1 The Role and Functions of Accounting and Finance
Chapter 2 Understanding Financial Statements
Chapter 3 Financial Performance Metrics
Chapter 4 The Impact of Income Taxes on Financial Analysis
PART TWO FINANCIAL PLANNING AND CONTROL
Chapter 5 Short-Term Financial Management and Supply Chain Finance
Chapter 6 Strategic Financial Planning
PART THREE CAPITAL ANALYSIS AND CORPORATE INVESTMENT DECISIONS
Chapter 7 The Time Value of Money
Chapter 8 Interest Rates and Valuation of Financial Securities
Chapter 9 Capital Investment Decisions
Chapter 10 Determining Cash Flows
PART FOUR LONG-TERM FINANCING STRATEGIES
Chapter 11 Cost of Capital, Hurdle Rates, and Financial Structure
Chapter 12 Long-Term Financing
Chapter 13 Leasing as a Financing and Business Alternative
PART FIVE FINANCE AND CORPORATE STRATEGY
Chapter 14 Strategy and Valuation: Creating Shareholder Value
Chapter 15 Mergers and Acquisitions
Index

Excerpt

CHAPTER 1

THE ROLE AND FUNCTIONS OF ACCOUNTING AND FINANCE

Corporate finance is a middle ground between economics and accounting. Corporatefinance is based on theoretical economic concepts applied to the "hard" numbersdeveloped by accountants. Finance uses accounting information to analyzeeconomic events. In a phrase, finance is applied economics. While accounting isthe language of business, finance is its literature. Financial analysis providesa systematic approach to making business decisions.

Finance is not an end in and of itself. It is a tool used to monitor, evaluate,and communicate the results of business decisions. Finance is a tool used toassess past events as well as anticipate the consequences of future decisions.It is a tool that is well suited for the board room and the production-shopfloor, the executive suite and the distribution center, and corporate anddivisional staff offices to a distant sales office. Improving financialperformance is the responsibility of every member of the organization, eitherdirectly or indirectly.

FINANCE IS EVERYONE'S JOB

In order to take on a general management role or become the head of a businessunit or functional unit, every manager must have a working knowledge of finance.He or she must be adaptive in improving day-to-day operations and enhancing thevalue of the organization. Managers must know how to make strategic investmentdecisions as well as operational decisions that use the many tools introducedand illustrated in this book.

Large corporations have specific staff to handle financial analysis and to helpmanagers make business decisions. In many organizations, diverse cross-functional project teams are formed to tackle specific assignments. These teamsmay include members from operations such as sales, marketing, production, andlogistics and staff areas such as human resources, engineering, research anddevelopment, and legal. These teams often will include a finance professional tohelp lead and guide the group's efforts toward financially sound decisions. Itis important for each functional area to better understand the role of financeand for finance to understand the role of the other functional areas as well asthe company's business model, its supply chain, and its strategic direction.

In smaller organizations, it is even more important for functional areas tounderstand finance and financial implications because often there is nodedicated financial analysis staff to assume responsibility.

Both the nonfinancial professional and the financial professional must be ableto understand and clearly communicate financial results and objectives. In away, all managers are financial managers because everyone has an impact on thebottom line and affects the value of the organization. Whatever your position,you need to know about the following necessary topics to be a more effectivemember of any business team:

• Reading, understanding, and using financial statements

• Analyzing financial statements to determine the financial health of a companyand its competitors, suppliers, and customers

• Managing the supply chain

• Planning the financial direction in support of the organization's mission,goals, and objectives

• Investing in the business through new products, new facilities, and cost-saving equipment

• Financing business growth through various techniques

• Determining the intrinsic value of the organization and how to enhance thatvalue

• Growing the business via acquisitions

Many members of an organization have bonuses and other compensation tied toachieving certain specific financial goals as well as the organization's commonfinancial objectives. It is important to understand the drivers for attainingthose goals as well as the other areas that are affected.

For example, sales and marketing often share an objective centered on top-line(sales) growth. This objective can be achieved easily with price reductions,advertising, or promotions (such as a buy-one-get-one-free offer) and so on. Ofcourse, all those "solutions" have income and cash-flow effects that may have anegative impact on the financial health of the organization. By extending theobjectives for the sales and marketing group to include sales and incometargets, the situation is partially resolved. However, sales and marketing willquickly learn about extended dating on accounts receivables. That is, instead of30 days for a customer to pay its bills, customers are given 60 or more days topay. While there are only minimal indirect income statement effects (i.e.,additional interest expense or lost interest income), the balance-sheetimplications and additional investment in working capital add pressure tofinancing availability and even may result in less business reinvestment inother areas.

Engineering, production, logistics, and research may want to manufactureproducts using the latest equipment with the fastest capabilities in a worldclass manufacturing facility. However, the financial implications must beunderstood. That is, does this investment provide an adequate rate of return?What are other business ramifications? Financing limitations may be imposed,balance sheets may be weakened, and business risk may increase substantially.Perhaps a less expensive alternative would provide maximum shareholder valuewithout having a discernible impact on the quality of the product. Capitalinvestment analysis determines the value-enhancement attributes of any capitalproject, whereas financial strategic planning anticipates the financial impactand assists in ranking alternative approaches.

Business is a series of managed conflicts. Marketing and sales want to sell aninfinite variety of products, whereas production would like to produce oneproduct. The conflicts can be...

Details zur Ausgabe

• Verlag: McGraw Hill
• Erscheinungsdatum: 2011
• Sprache: Englisch
• ISBN 10: 007176836X
• ISBN 13: 9780071768368
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 528
• Kontakt zum Hersteller: McGraw-Hill Education; https://www.mheducation.co.in/; ; Via Verdi, 8; Assago Milano; 20090; Italien