Page 13 - Finance for Non-Financial Managers

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Preface
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delve into the “hidden information” that every company has.
Each is intended to explore a specific analysis area in which
basic financial information is reorganized and detailed in more
depth in order to present that hidden information. The objective
of these chapters is for you to know how to get to that informa-
tion from these reports and understand what the reports are
telling you.
Chapter 7 focuses on operating ratios, selected relational cal-
culations based on numbers in the financial statements. Their
purpose is to show relationships between two variables that may
not be visible in a casual reading of the statements, but that are
important to assessing a company’s overall financial health. We
will discuss some of the most common and useful ratios and
how you can best use them to better understand the underlying
strength of whatever it is they are measuring. This is a chapter
you might return to often, as it is a handy reference tool.
Chapter 8 explains the essentials of cost accounting—how it
works and why it is so important in helping a company control
its gross profit margins. The fundamental purpose of cost
accounting is to enable managers to know the actual cost of the
products or services their company sells, so they can choose to
sell more of the profitable ones and less of the unprofitable
ones.
Chapter 9 is about business planning. It discusses the
importance of planning, the difference between strategic plan-
ning and operational planning, using vision and mission as the
starting point for planning strategy, and setting long-term and
short-term goals.
Chapter 10 explains the fundamentals of financing a busi-
ness—getting the capital to launch it and the working capital to
operate it. This is an important area for growing businesses
everywhere, because growth consumes capital often at a faster
rate than a growing business can create it internally. This chap-
ter looks at both debt and equity financing, explains some of
the techniques used, and discusses some of the advantages and
disadvantages of each.