How to Keep Score in Business:Accounting and Financial Analysis for the Non-Accountant

Description

Features

The classic accounting guide for the non-expert, now fully updated!

• #1 guide to uncovering crucial business insights buried in balance sheets, income statements, and other financial reports.
• Indispensable practical help for day-to-day business and investment decision-making.
• Up-to-the-minute coverage of ROI analysis, cash flow planning, and identifying business trends.
• No experience necessary: perfect for new managers and entrepreneurs!

Table of Contents

Chapter 1 Introduction    1

The First Lesson: Scores Are Not Real Dollars     5

The Accrual Method     6

But Scores Are Important     7

Chapter 2 Glossary of Key Financial Accounting Terms     9

Glossary     10

Chapter 3 The Balance Sheet     31

The Balance Sheet Balances     31

Acme Widget Company     35

Acme Widget's Year-End Balance Sheet     38

A “Trial Balance”     43

Constructing the Balance Sheet     45

Summary     46

Chapter 4 More Balance Sheet    47

Cost Versus Value     47

Intangible Assets     48

Goodwill     50

Reserves and Allowances     51

The Going Concern Assumption     52

Estimates Are Everywhere     53

Purpose and Perspective     53

Current Versus Noncurrent Balance Sheet Items     55

Working Capital     55

Average Collection Period     58

Inventory Turnover     60

Chapter 5 Still More Balance Sheet    63

The Worksheet for Transactions     65

Trial Balance Worksheet     68

The Balance Sheet     68

Analyzing the Balance Sheet     69

Balance Sheet Summary     71

Chapter 6 The Income Statement    75

The Basic Income Statement     76

Acme Widget's First-Year Income Statement     80

More on Cost of Sales     83

Nonoperating Income and Expense     86

Acme Widget's Second-Year Income Statement     87

Reconciliation of Retained Earnings     89

Analyzing Income Statements     90

Complicating Cost of Sales     91

Summary of the Income Statement     94

Chapter 7 Return on Investment (ROI)     99

Return on Equity (ROE)     101

Return on Invested Capital (ROIC)     102

Return on Assets Used (ROAU)     103

Cash-on-Cash Return     105

Payback Method     106

Discounted Cash Flow or Present Value Method     106

Summary     115

Chapter 8 Changes in Financial Position     117

Summary     121

Chapter 9 Cash Flow Budget     123

Summary     129

Chapter 10 Other Analysis Ratios and Tools     131

Profit as a Percentage of Sales     131

Breakeven     132

Current Ratio     135

Acid Test or Quick Ratio     135

Debt-Equity Ratio     135

Earnings Per Share     136

Price-Earnings Ratio     136

Chapter 11 A Summary of What You Have Learned     139

The Balance Sheet     140

The Income Statement     144

Statement of Changes in Financial Position     146

Cash Flow Budget     147

Analyzing Financial Reports     147

Conclusion     151

Appendix A Acme Widget Company 153

Appendix B Present Value Tables 169

Back Cover

The Classic Business Accounting Guide for Every Manager and Entrepreneur-Now Fully Updated!

•  Uncover crucial insights buried in balance sheets, income statements, and other financial reports

•  Master indispensable skills for day-to-day business and investment decision-making

•  Learn up-to-the-minute techniques for analyzing ROI, planning cash flow, and identifying business trends

In this classic book, long-time CEO Robert Follett shows you exactly how to “keep score” in business by reading and accurately interpreting company financials. Step by step, Follett helps you capture crucial insights buried in balance sheets, income statements, and other key reports. Follett shows how to apply core tools for analyzing financial reports and investment opportunities, and demystifies key accounting terms every manager and investor needs to know.

Fully updated for today's tools and techniques, this book will help you work confidently with accountants, auditors, financial analysts, budget directors, controllers, treasurers, bankers, and brokers…and make better business decisions every single day.

A Note from the Author, Long-Time CEO Robert Follett:

“In business, the score is kept in dollars. The accounting system provides the rules for keeping score. This book will teach you those rules.

“I am not an accountant. I started in sales. I moved into product development. I was president of a large company. I became chairman of an even larger company. Along the way, I had to learn financial accounting the hard way.

“I have worked with accountants, auditors, bankers, treasurers, controllers. These experts often flim-flammed me with accounting lingo I didn't understand. I've made almost every dumb mistake that a manager with no financial background can make.

“But I learned. Now I can keep score along with the best. I've distilled many years of hard knocks and dumb mistakes into a relatively few pages. When you're finished studying this book, you will be well on your way to mastery of this indispensable management skill. You will know how to keep score in business.”

This book will help you:

• Bring practical common sense to financial analysis

• Understand what your financial pros are telling you-and what they aren't

• Evaluate any company's balance sheet

• Recognize what balance sheets and income statements may be hiding

• Create cash flow budgets that keep you from running out of cash

• Identify changes in a company's financial position

• Use ROI tools to evaluate performance and analyze investments

• Understand “goodwill,” “working capital,” “acid tests,” and other key concepts

Author

Robert Follett served as President of Follett Publishing Company and as Chairman of Follett Corporation, a company that has
grown to almost $3 billion in annual sales by providing universities, libraries, schools, and school districts with educational tools and services.