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Financial Intelligence
Emotional Intelligence
4
Financial Information
Gross
Margin = 22%
Operating
Margin = 7.5%
Net
Margin = 2.8%
Financial
Knowledge
Financial
Numbers
6
Know
Why
Know
How
Know
What
Know
nothing
Finance is an Art
9
Financial Numbers
10
X + Y = 1.10
X-Y =1
1 + Y + Y = 1.10
Y = 0.05
11
12
200
400
100
200
800
400
Customers
100
Potential
Customers
13
$ Millions
132
131
130
129
01/2010
03/2010
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$ Millions
140
120
100
80
01/2009
01/10 03/10
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Financial
Information
17
19
20
22
Income Statement
Profit is an Estimate
24
25
26
28
29
30
32
Increase Revenue
(Revenue Recognition)
34
35
Channel Stuffing
Company inflates sales
figures by forcing more
products through a
distribution channel
than the channel is
capable of selling to the
world at large.
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Reduce Expenses
(Matching Principle)
37
Income Statement
38
Net Profit
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Balance Sheet
42
Underreporting line
costs (interconnection
expenses with other
telecommunication
companies) by capitalizing
these costs on the balance
sheet rather than properly
expensing them.
Goodwill
Goodwill =
Price paid - net assets (Assets - Liability)
Goodwill = $6 - (5 - 2) = 3
Goodwill could be amortized over a maximum
of forty years or the estimated useful life of the
acquired business.
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!"#$%&'()#*(&+,(&*-.+&/*0-"+#$+&#..(+&
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Cash is King
Warren Buffett
49
Profit = Cash
Profit will be turned into cash
Profit without cash
Cash without profit
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!""#
Cash Flow
Statement:
%&'()*+,-./0/)12)34'0/)5,+6)780+&9.:;)<=9.-.9.0'
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of property and equipment . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
465,000
!""$
$
272,000
479,000
317,000
(28,000)
300,000
69,000
(59,000)
(3,000)
(34,000)
11,000
13,000
108,000
(64,000)
129,000
32,000
22,000
(110,000)
1,328,000
591,000
(1,010,000)
38,000
(22,000)
(1,430,000)
7,000
(994,000)
(1,423,000)
%&'()*+,-./0/)12)34'0/)5,+6)?.:&:=.:;)<=9.-.9.0'
Additional long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,000
(322,000)
68,000
(154,000)
(271,000)
863,000
(560,000)
466,000
(18,000)
(133,000)
618,000
63,000
(214,000)
................
314,000
528,000
377,000
$ 314,000
%&'()&:/)=&'()0@A.-&B0:9'C)10;.::.:;),5)20&+
%&'()&:/)=&'()0@A.-&B0:9'C)0:/),5)20&+
........................
51
Anne
George
Unmarried
52
P r o f e s s i o n a l s ,
w h o
h a ve
knowledge
and
experience,
may
think
they
can
make
decisions
without
really
using
their
minds.
They
dont
expect
new
things
and
they
miss
them.
They
look
at
the
details
and
forget
the
big
picture.
53
54
Strategic Financial
Decisions
55
www.openthinkingacademy.com
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