Naked Finance: Business Finance Pure and Simple

by David Meckin

Overview

For most managers, the normal round of hectic schedules, tricky staff issues and impending deadlines are well within their management capabilities. It is the financial issues that give them headaches. Nobody has ever explained how to balance sales against costs, how to interpret financial reports, how to prepare a budget or even how to argue the case for the new equipment their department needs so badly. They have no idea why the company's share price keeps falling and certainly don't understand why this should result in layoffs. In fact, the whole issue of finance is a mystery. Successful management of the finances of a business requires an understanding of some key principles - and that is what NAKED FINANCE is all about. It strips away all the technical issues surrounding financial management and lays bare the principles needed to make sound financial decisions. Firstly, Meckin shows how to identify financial objectives so you know where you are going - explaining the importance of profit and cashflow, how to measure financial performance and which are the key figures to watch. He then outlines how to use financial information to understand what's going on around you, covering the format and content of financial statements and how they can be used to assess past trading performance. Finally he describes how to ensure financial control and create a financial plan so you can take control of where you are going, managing costs, sales, profit and cash flow and long-term projects. Purely and simply, NAKED FINANCE provides the skills necessary to manage a profitable business.

Product Details

ISBN-13:	9781473644823
Publisher:	Quercus
Publication date:	05/12/2011
Sold by:	Hachette Digital, Inc.
Format:	eBook
File size:	6 MB

About the Author

David Meckin is managing director of Insight Financial Consulting and has over 20 years' commercial experience, including as finance director of a multinational. He is a qualified accountant, a Member of the Chartered Management Institute and a Fellow of the Chartered Institute of Bankers. He regularly delivers workshops and presents at conferences internationally, and his clients include FTSE-100 companies and household names worldwide.

Table of Contents

What is Naked Finance?     1
Why do managers need to understand finance?     2
How is this book going to help me?     3
Setting Financial Objectives     9
Is It All About Profit?     10
What does a business need to survive?     10
What is the objective of financial management?     11
What is profit?     13
Is cash flow important?     18
How Do You Make Profit?     20
Where does the profit-making process start?     20
Why do companies need shareholders?     21
Why do companies borrow?     24
Why do companies need assets?     28
Why are companies obsessed with sales?     29
How Do You Measure Financial Success?     32
How do shareholders measure success?     32
How do managers measure success?     38
Are there other commonly used measures of success?     41
Which are the Figures That Count?     46
What are the four key figures in a business?     46
How do the four key figures interrelate?     52
What strategies will enhance the profit-making process?     53
Using Financial Information     59
Why Produce Financial Statements?     60
What is the role of financial statements?     61
What does a balance sheet tell you?     63
What does an income statement tell you?     72
What does a cash flow statement tell you?     82
Where do accounting scandals come from?     85
What Can You Learn from Financial Statements?     90
What is the first thing you should look for?     90
What can financial statements tell you about how a business is being managed?     94
How do financial statements interrelate?     100
How can financial statements be used to help manage a business?     101
What are the danger signals to watch out for?     103
What Can You Learn from the Financial Press?     105
How do you value a company?     106
What determines share prices?     109
How can you interpret the share price information of a publicly quoted company?     111
How do you manage share prices?     121
How do you determine the share price of a privately owned company?     122
How do you value an unincorporated business?     124
How Do You Know if a Company is Being Well Managed?     127
What is shareholder value?     128
How do you know if a company is creating shareholder value?     128
Why is shareholder value important?     134
How can you measure the amount of shareholder value being created?     135
Providing Financial Control     139
How do You Create a Financial Plan?     140
Why have financial plans?     141
What is the difference between a forecast and a budget?     142
Can a budget ever be right?     143
How do you create a budget?     146
How do you agree on a budget?     152
How do You Manage Costs?     156
What drives costs?     156
How do costs affect the relationship between sales and profit?     159
Is there an optimal cost structure for a business?     163
How Do You Manage Sales?     168
How can you ensure that sales will be profitable?     168
How can you plan sales quickly?     170
How can you decide if a sales plan is achievable?     174
How can you evaluate alternative sales strategies?     176
Why do businesses fail to make a profit?     180
How Do You Manage Profit?     182
What can you learn from a budget report?     183
Why does actual profit differ from budgeted profit?     186
Where is management action required?     201
How is management action to be prioritized?     202
How should you use a budget report?     203
What About Cash Flow?     208
What is cash management?     209
What is the link between cash management and profit management?     213
How can you measure cash performance?     214
Is there an optimal cash flow?     218
How Do You Manage Cash Flow?     220
What are the main issues that affect cash flow?     220
How do you manage inventory?     221
How do you manage accounts receivable?     225
How do you manage accounts payable?     227
Should companies maintain high or low cash balances?     228
What About Long-Term Projects?     230
What is a long-term project?     230
How do you argue the case for a long-term project?     232
How do you evaluate the risk of a long-term project?     236
How Do You Decide if a Long-Term Project is Worthwhile?     243
How do you make the accept/reject decision?     244
What is return on investment?     246
What is payback?     249
What is net present value?     252
What is internal rate of return?      258
Summary     261
How Do The Pieces Fit Together?     262
How do you manage a profitable business?     262
A parting thought     267
Index     269

Editorial Reviews

Meckin, an accountant and managing director at a financial consulting firm, adopts a "tell them what you are going to say, say it, then summarize it in both words and pictures presentation style" in this volume. While his simple approach may be too basic for managers or those with advanced financial literacy, newcomers to the subject will benefit from its nuts and bolts explanations. Meckin acknowledges that financial statements and the mechanisms behind them are plagued by technical jargon, which he aims to strip away. His friendly tone leads readers through explanations of such concepts as calculating profit, a dividend yield's significance and the relationship between cash management and profit management, leaving nothing to interpretation. At heart the book is an introduction to accounting principles. As with Meckin's labored metaphor comparing financial management to driving a car, the simplicity can at times be pedantic. Inclusion of the skeleton of the book's outline-"bare bones" summaries are ghoulishly illustrated with skeletons-make it an easy skim. (Feb. 11)

Copyright 2007 Reed Business Information

Publishers Weekly

'This is a highly recommended book: straightforward, easy to read, very clear concepts and content and very well explained.—Business Executive

Nobody makes this subject more interesting and enjoyable to understand. If you want to be credible in any business conversation this book is an essential tool. You can try and pretend that understanding finance is not important to you, but actually it is essential in any business role. If you don't know your asset turnover from your cash flow, read this now!

NAKED FINANCE takes readers on a painless (even fun) journey of financial management discovery, steering through a complex maze of financial management reports and jargon, truly stripping it down to the 'bare bones'.—Audrey McLaren, Operations Director, Standard Life Assurance Germany

NAKED FINANCE combines many aspects that are not seen in books that introduce finance to managers. It is written by an outstanding practitioner, it has a high degree of sophistication which will not be perceived by the technically untrained reader, it outlines how managers can understand and use finance in their jobs, and it explains it all in a clear, witty and informative manner. It is a practical and reliable guide for managers in any type of business. All in all it is a stunning introduction to finance which should be part of every manager's toolkit.

Here is a complex subject stripped to its bare essentials and delivered in an easily digestible format by a master of his brief. Over the years David Meckin has made the business of understanding finance interesting and fun for thousands of managers. This is an opportunity for everyone to benefit from his unique style - every business should have a copy to hand.

An excellent Return on Investment! Covers the fundamentals and basic principles of finance in a clear and simplified way. Essential reading for the successful manager.—Robert King, Group HR Manager, Harvey Nichols

A straightforward and easy to read book, with very clear concepts and content, extroadinarily well explained, great examples.—Fernando Pina, Stores Training Manager, Nike Europe

From the Publisher