The Finance Gem 💎 Week #40

Welcome to a New Edition of The Finance Gem 💎

weekly strategic finance gems to accelerate your career and grow your business

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• The Financial Analysis Cheat Sheet

• The Costing Cheat Sheet

• 100 Finance & Accounting Acronyms Cheat Sheet

• 100 Questions for the CFO

• ROIC vs. ROE

Let’s dive in!

But first, allow me to share some seriously amazing Fall Savings.

• My viral cheat sheets, checklists and infographics are now available in full resolution. Visit my web store and turn your favorites into posters! Or give them as gifts and become the coolest finance buff!

• If you’re in San Diego for AFP 2023, let’s connect! I’m speaking on Monday October 23, and would love to meet you there!

• I use Thinkific to power up The Cash Flow Masterclass and the several upcoming courses I have in the works. Download the new Thinkific mobile app and access my courses anywhere, anytime — on any device.

  

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To help you make sense of past results, manage your present targets and plan future goals.

➡️➡️➡️𝐇𝐞𝐫𝐞 𝐢𝐬 𝐰𝐡𝐚𝐭 𝐓𝐡𝐞 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐂𝐡𝐞𝐚𝐭 𝐒𝐡𝐞𝐞𝐭 𝐢𝐧𝐜𝐥𝐮𝐝𝐞𝐬:

🎯 The Financial Analysis Scorecard

🎯 Vertical Analysis

🎯 Horizontal Analysis

🎯 Sensitivity Analysis

🎯 Project Profitability

🎯 The Dupont Analysis

🎯 5 EBITDA Ratios

🎯 5 Cash Flow Ratios

🎯 Key Profitability Ratios

🎯 Key Liquidity Ratios

🎯 Key Solvency Ratios

🎯 Key Efficiency Ratios

Click the image to download a PDF copy.

11 Essential Cost Areas to Manage.

Because costs will drive your break even point.

Your Breaking Even Point will drive your Net Income.

And your Net Income will drive your financial stability and growth.

➡️➡️➡️ Here’s what’s included in the Costing Cheat Sheet:

🎯 The Key Cost Drivers

🎯 Cost - Volume - Profit Analysis

🎯 The Overhead ABC

🎯 Gross Profit vs. Contribution Margin

🎯 10 Types of Costs

🎯 20 Cost KPIs

🎯 20 Cost Analyses

🎯 The Weighted Average Cost of Capital

🎯 Margin vs Markup

🎯 CAPEX vs. OPEX

🎯 60 Cost Concepts

Use this Cheat Sheet to help close to these critical Cost concepts, and help improve your profitability and sustainability.

And help others to the same by sharing this valuable resource.

Click the image to download a PDF copy.

100 Key Concepts to Manage.

Which one is new to you?

How would it benefit your career to learn it?

Here’s an essential list of 100 Finance & Accounting Acronyms to help you grow your knowledge and expand your skills.

What areas are covered?

1. Financial Statements & Reporting

2. Cash flow and working capital

3. Debt and Equity

4. Profitability and Returns

5. Asset Management

6. Costing Methods

7. Revenue Metrics

8. Securities

9. Others

Click the image to download a PDF copy.

Do you want revenue growth, maximized profit & optimal capital allocation?

Strategic finance insights for competitive advantage & market leadership?

Investor support from transparent and strategic financial management?

A future-proofed company through proactive and resilient planning?

Regulatory compliance to protect from legal and compliance risks?

Quick decision-making that allows agile and informed choices?

Strategic alignment between your business and finance goals?

Efficiency in budgeting, forecasting, and financial operations?

Robust financial risk mitigation to manage uncertainties?

Alignment between finance and operations teams?

☑️ Then you need your CFO to be able to answer these critical 100 questions.

Click on the image below to download a pdf copy.

Do you know what they are, how to calculate and most importantly when (not) to use them?

ROIC (Return on Invested Capital) and ROE (Return on Equity) are widely used in financial performance analysis to assess how efficiently your company is investing in growth.

These profitability ratios are often confused because they’re as similar as they are different.

How they are similar:

⚫ Both are based on accounting numbers, making them useful in measuring a company's asset efficiency.

⚫ Both measure your company's investment efficiency based on profitability,

How they’re different:

⚫ ROE measures profitability through Net Income, ROIC measures profitability through NOPAT

⚫ ROE measures the return on just the equity invested in your business, ROIC evaluates the return earned on the total capital (attributable to equity investors and creditors) invested in your business

How to calculate them:

⚫ ROE = Net income / Shareholder's equity

⚫ ROIC = Net operating profit after taxes / (Debt + Equity - Cash)

How to use them:

⚫ ROE (vs WACC) to assess whether a firm is generating shareholder value or destroying value

⚫ ROIC if you want to compare the capability of firms to generate returns on their capital with different capital structures

What to be aware of:

⚫ ROE can be misleading for companies with huge cash balances since it does not deduct cash from the denominator in the calculation

⚫ ROIC is generally considered more useful because it includes the debt component of a firm and thus becomes insensitive to actions that can heavily impact shareholder equity

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Thanks so much for reading. See you next week.

Oana

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