Financial intelligence: a manager's guide to knowing what by Karen Berman

By Karen Berman

Businesses anticipate managers to take advantage of monetary facts to allocate assets and run their departments. yet many managers cannot learn a stability sheet, would not realize a liquidity ratio, and do not understand how to calculate go back on funding. Worse, they do not have any thought the place the numbers come from or how trustworthy they are surely. In monetary Intelligence, Karen Berman and Joe Knight train the fundamentals of finance--but with a twist. monetary reporting, they argue, is as a lot artwork as technology. simply because not anyone can quantify every little thing, accountants regularly depend upon estimates, assumptions, and judgment calls. Savvy managers want to know how these assets of attainable bias can have an effect on the financials and that usually the numbers will be challenged. whereas offering the basis for a deep realizing of the monetary part of commercial, the e-book additionally hands managers with useful concepts for bettering their businesses' performance--strategies, akin to "managing the stability sheet," which are good understood through monetary pros yet not often shared with their nonfinancial colleagues. obtainable, jargon-free, and jam-packed with unique tales of actual businesses, monetary Intelligence offers nonfinancial managers the monetary wisdom and self belief for his or her daily paintings. Karen Berman and Joe Knight are the vendors of the Los Angeles-based enterprise Literacy Institute and feature expert tens of hundreds of thousands of managers at many top corporations. Co-author John Case has written a number of well known books on administration.

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Still, a little more knowledge will give you the tools to watch trends at your company and understand more of the stories behind the numbers. While you might not have all of the answers, you should know what questions to ask when you don’t. It’s always worth your while to assess your company’s performance and prospects. You’ll learn to gauge how it’s doing and to figure out how you can best support those goals and be successful yourself. Balance Sheet The balance sheet reflects the assets, liabilities, and owners’ equity at a point in time.

But even if there hadn’t been fraud, WorldCom’s ability to generate cash was out of step with its growth-by-acquisitions strategy. It could live on borrowing and stock for a while, but not forever. Or look at Tyco International. For all the news stories about Dennis Kozlowski’s elaborate birthday party and zillion-dollar umbrella stand, there is another story that wasn’t widely reported. During the 1990s, Tyco also was a big acquirer of companies. In fact, it bought some six hundred companies in just two years, or more than one every working day.

A company doing a lot of borrowing has to keep its profits up; otherwise, the banks will stop lending it money. So on two fronts, WorldCom was under severe pressure to report high profits. That, of course, was the source of the fraud that was ultimately uncovered. The company artificially boosted profits “with a variety of accounting tricks, including understating expenses and treating operating costs as capital expenditures,” as BusinessWeek summarized the Justice Department’s indictment. 2 When we all learned that WorldCom was not as profitable as it had claimed, the house of cards came tumbling down.

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