The Finance Gem 💎 Week #30: Strategic Finance, CEOs, Cash Flow and Acronyms

Welcome to a new edition of The Finance Gem 💎 

Here are this week’s strategic finance gems to help you accelerate your career and grow your business.

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• 7 Finance Skills All Managers Need

• Are you eyeing the CEO role?

• FREE Cash Flow Masterclass

• 100 Finance & Accounting Acronyms Cheat Sheet

Understanding Financial Statements

Presentation & Communication

Budgeting and Forecasting

Investment Analysis

Financial Analysis

Risk Assessment

Cost Analysis

Here are the 7 Finance Skills All Managers Need to Know:

1️⃣ Understanding Financial Statements

🎯Understanding the three major financial statements:

⬛ The income statement, the balance sheet, and the cash flow statement

🎯Horizontal (Trend) Analysis: comparing financial data over time.

⬛Formula: (Current Year / Base Year -1)* 100

🎯Vertical (Common Size) Analysis: express each line item in a financial statement as a percentage of a base figure

⬛ Typically revenue for the income statement and total assets for the balance sheet

2️⃣ Analyzing Ratios and Metrics

🎯Liquidity Ratios: Measure a company's ability to meet short-term liabilities.

⬛Current Ratio (Current Assets / Current Liabilities)

⬛Quick Ratio ([Cash + Marketable Securities + Receivables] / Current Liabilities)

🎯Profitability Ratios: Measure a company's ability to generate profits.

⬛Gross Margin (Gross Profit / Sales)

⬛Operating Margin (Operating Profit / Sales)

⬛Net Margin (Net Profit / Sales)

🎯Solvency Ratios: Measure a company's ability to meet long-term liabilities.

⬛Debt-to-Equity Ratio (Total Debt / Total Equity)

⬛Debt Coverage Ratio (EBIT / Total Debt)

🎯Efficiency Ratios: Measure how well a company utilizes its assets and liabilities

⬛Asset Turnover (Sales / Total Assets)

⬛Inventory Turnover (Cost of Goods Sold / Average Inventory)

3️⃣ Preparing/Reviewing Budgeting and Forecasting

🎯Incremental Budgeting:

⬛ historical cost method which ads a certain amount of capital to a previous period's budget to drive the next period's budget

🎯Activity-Based Budgeting:

⬛ activity based costing method of driving the budget by recording, analyzing and researching the activities which actually drive the organizational costs

🎯Zero-Based Budgeting:

⬛ aggressive and involved budgeting method which requires all costs to be justified from scratch by starting with a "zero base" for each one

4️⃣ Cost Analysis

🎯Cost-Volume-Profit Analysis:

⬛examines the relation between cost, production volume and profit

🎯Direct vs Indirect Costs:

⬛direct costs can be traced to cost objects like products, whereas indirect costs cannot be traced back directly

🎯Product vs Period Costs:

⬛product costs are tied to the production process, while period costs are not tied to the production process and are incurred over time, like rent or administrative expenses

5️⃣ Investment Analysis

🎯Net Present Value (NPV):

⬛difference between the present value of cash inflows and the present value of cash outflows

🎯Internal Rate of Return (IRR):

⬛discount rate that makes the NPV of all cash flows equal to zero

🎯Payback Period:

⬛time it takes for an investment to generate an amount equal to the original investment

6️⃣ Presentation and Communication

🎯Financial Storytelling:

⬛ability to narrate a sequence of financial events in a way that it engages the listener and delivers a clear message

🎯Effective Listening:

⬛active process of making a conscious effort to hear not only the words being spoken but, more importantly, understand the complete message being sent

🎯Adaptive Leadership:

⬛practice of mobilizing people to tackle tough challenges and thrive

7️⃣ Risk Assessment

🎯Market Risk:

⬛risk of investments declining in value because of economic developments or other events that affect the entire market

🎯Credit Risk:

⬛risk of loss arising from a borrower who does not make payments as promised

🎯Liquidity Risk:

⬛risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss

🎯Operational Risk:

⬛risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events

Are you eyeing the CEO role?

Here are 15 key areas CEOs should focus on.

Use them to help track your learning, your progress or your performance.

1. Vision and Strategy Development: map the company’s future, ensure alignment with strategic vision, and develop long-term goals and strategies to overcome challenges.

2. Leadership and Organizational Culture: create a positive and productive organizational culture, leading by example to inspire teams and uphold company values.

3. Financial Management: oversee the company's financial health to ensure shareholder value creation

4. Corporate Governance: work with the board of directors to ensure adherence to the highest standards of governance, ethical conduct, and regulatory compliance

5. Risk Management: identify potential risks to the company and ensure it has systems in place to mitigate them

6. Operational Efficiency: streamline operations, improve productivity, and promote innovation

7. Talent Management: hire and develop key executives, ensuring the right people are in the right roles to effectively drive the strategic plan

8. Customer Focus: foster a customer-centric approach across all department, to understand and meet customer needs

9. Investor Relations: maintain strong relationships with investors, shareholders, and financial analysts to secure capital, support growth, and maintain market confidence

10. Brand Reputation and Image: act as the face of the company, and ensure their actions reflect positively on the brand

11. Innovation and Technology: foster a culture of innovation to gain and retain competitive advantages

12. Sustainability and Corporate Social Responsibility: balance the drive for profit with the need for ethical and sustainable operations

13. Stakeholder Management: manage relationships with various stakeholders, including employees, customers, suppliers, local communities, and regulatory bodies

14. Mergers and Acquisitions: evaluate opportunities for growth via mergers, acquisitions, partnerships, or joint ventures, and oversee their successful execution

15. Business Continuity and Succession Planning: develop and implement a comprehensive business continuity plan, to ensure operations continue during a crisis as well as after they change positions and are no longer CEOs.

FREE Cash Flow Masterclass

10 Essential Cash Flow Lessons for You 👇👇👇

To help you Master the Art of Cash Flow.

𝐔𝐬𝐞 𝐭𝐡𝐞𝐬𝐞 𝐩𝐨𝐬𝐭𝐬 𝐭𝐨 𝐥𝐞𝐚𝐫𝐧 𝐟𝐨𝐫 𝐟𝐫𝐞𝐞 𝐦𝐚𝐧𝐲 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐚𝐬𝐡 𝐟𝐥𝐨𝐰 𝐭𝐨𝐩𝐢𝐜𝐬 𝐈 𝐭𝐞𝐚𝐜𝐡 𝐢𝐧 𝐦𝐲 𝐩𝐨𝐩𝐮𝐥𝐚𝐫 𝐨𝐧-𝐝𝐞𝐦𝐚𝐧𝐝 𝐯𝐢𝐝𝐞𝐨 𝐜𝐨𝐮𝐫𝐬𝐞 𝐓𝐡𝐞 𝐂𝐚𝐬𝐡 𝐅𝐥𝐨𝐰 𝐌𝐚𝐬𝐭𝐞𝐫𝐜𝐥𝐚𝐬𝐬.

0// The Cash Flow Cheat Sheet: https://bit.ly/44CY0mm

1// How to connect Cash with Profit: https://lnkd.in/ecMzMnd6

2// The 3 Main Cash Flow Drivers: https://lnkd.in/eEDWBzEA

3// Cash Inflows and Outflows: https://lnkd.in/ei8vdP_B

4// Cash Flow Statement: Direct or Indirect: https://lnkd.in/e-NBhUG4

5// The Cash Conversion Cycle: https://lnkd.in/eWZgYGBQ

6// The Business Cash Flow Dashboard for CFOs: https://lnkd.in/etSAAjCU

7// The 5 Steps to manage your cash flow: https://lnkd.in/eXckPBqb

8// Cash Flows in Capital Budgeting: https://lnkd.in/eBFDr9F9

9// 16 Cash Flow KPIs: https://lnkd.in/eQEr7ADj

10// The Master Budget Flow: https://lnkd.in/e-J9Raq8

100 Key Concepts to Manage.

🎯🎯🎯Here’s an invaluable list of 100 Finance & Accounting Acronyms to help you grow your career and expand your business.

1. Financial Statements & Reporting

2. Asset Management

3. Costing Methods

4. Revenue Metrics

5. Securities

6. Others

Download your copy here, free for a limited time.

1. Upgrade your strategic finance skills with The Cash Flow Masterclass. Leverage my unique on-demand video course to improve your knowledge, elevate your decision making and accelerate your career. For customized team training please apply here.

2. Sponsor a future issue of The Finance Gem 💎and get your brand in front of an exceptional audience of strategic finance, accounting, sales and technology professionals and executives.

3. Train your team in strategic finance concepts and elevate their knowledge, decision-making and productivity. Reach out here.

Thanks so much for reading. See you next week.

Oana