Summary of Smart Things to Know About Business Finance

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  • Applicable


Let’s face it, a lot of people in business had no intention of ending up in business when they were studying in college. Corporate cube-mazes are riddled with liberal arts majors turned middle management. It’s time for many of you non-business majors to admit your secret weakness: You can’t read a financial statement. Now that it’s out in the open, take a deep breath and dive into Ken Langon and Alan Bonham’s business finance primer, which will teach you to mash numbers with the best of ’em, or at least fake it as well as anyone else. All the basics are covered here: earnings, margins, cashflow, liabilities and assets. The book also provides a thorough rundown of other financial ratios that executives, analysts and investors use to measure performance. Don’t let the financial terminology or the slightly British-tilting jargon put you off. recommends this book to anyone in business who feels that gaps in your financial education have placed you at a disadvantage to your MBA-toting peers.

About the Authors

Ken Langdon is a consultant and author of books about investing, sales and finance. Alan Bonham is a chartered accountant, consultant and trainer, and co-author of a book about investing.



Reading Financial Statements

Many executives who run sales, marketing or research divisions are mystified by the jargon of their companies’ financial gurus. Managers who fail to acquire financial savvy do so at their peril because they’re apt to make seemingly sound decisions that are financially wrong. To understand corporate finance, first consider the purposes of the finance department:

  • Consider and evaluate possible ventures, and invest in ventures.
  • Raise money.
  • Establish budgets and monitor those budgets.
  • Produce semi-annual and annual reports.
  • Compute financial ratios and analyze financial reports.

Why Shareholders Invest

When investors put money into a company, they do so believing the firm will achieve specific goals set by management. For instance, if a company promises that its dividends will outpace inflation for three years, investors expect the company to do exactly that. Failure to meet that goal will hurt the firm’s share price. If the failure is significant or prolonged, shareholders are likely to remove the chairman. Therefore, living up to investors’ expectations becomes an important driver ...

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