Financial Management Essentials You Always Wanted To Know

5th Edition

Kalpesh Ashar, Vibrant Publishers

• Publisher: Vibrant Publishers
• Year: 2022
• ISBN:
  9781636511016
• Edition: 5
• Topic: Betriebswirtschaft
• Subtopic: Buchhaltung & Budgets

• Financial Management Concepts Simplified
• Core Financial Concepts Explained for Business Professionals and Non-Finance Graduates
• Chapter Summaries and Solutions to Practice Exercises
• New Chapter on International Finance
• Important Standard Principles covered
• Solved Exercises and Practice Questions

Financial Management Essentials You Always Wanted To Know: 5th Edition provides new managers and leaders with the foundational concepts of financial management. This book offers an in-depth study on the type of financial resources companies acquire and how they utilize these assets in their business processes and activities. Each chapter provides real-world examples of financial management practices and includes practice exercises to help train the reader in the usage of these critical tools.

With this book, you will be able to:

• Understand Financial Statement Analysis
• Learn about Cost of Capital
• Learn how to Create a Capital Budget
• Understand how to Manage Working Capital
• Study Stocks and Dividends
• Explore Financial Forecasting

Pick up your copy of Financial Management Essentials and become a financial manager today.

About the Series

Financial Management Essentials You Always Wanted To Know: 5th Edition is part of the Self-Learning Management series. This series is designed to help students, new managers, career switchers, and entrepreneurs learn essential management lessons and covers every aspect of business, from HR to Finance to Marketing to Operations across any and every industry. Each book includes basic fundamentals, important concepts, and standard and well-known principles, as well as practical ways of application of the subject matter. The distinctiveness of the series lies in that all the relevant information is bundled in a compact form that is very easy to interpret.

Chapter 2

Financial Statement Analysis

This chapter concentrates on the techniques to analyze financial statements.

The key learning objectives of this chapter are:

• Learn financial ratio analysis
• Know how to prepare common-size financial statements for analysis

Analysis of Financial Statements is done using financial ratios and common-size financial statements. In this chapter, we shall discuss both techniques in detail.

2.1 Ratio Analysis

The financial statements of a company report the company’s position at a given point in time (Balance Sheet) and its operations over a period of time (Income Statement and Statement of Cash Flows). This data can be used by the company’s management, bankers, and investors to predict the future and to plan actions that improve it. But this analysis is more useful when done using financial ratios instead of individual numbers from the financial statements. For example, consider a company paying $100,000 interest on its debt of $1,000,000, and another company paying $50,000 interest on its debt of $700,000. If one needs to know which company is financially stronger, it can be done by comparing the company’s interest expense with respect to its debt, studying the company’s debt with respect to its total assets, comparing the interest paid against the income of the company and comparing its debt structure with that of other firms in the same industry.

In order to perform the above analysis, ratios have to be formed using data from the balance sheet, income statement, and the statement of cash flows of the company. There are several ratios that exist, and each has a different purpose. Some ratios involve only balance sheet items, or income statement items, or items from the statement of cash flows. Others involve a combination of items from these three statements. In the sections below, we will see how ratios are computed and used for decision-making with the help of the financial statements of All Fresh, a food-producing company.

Balance Sheet (in million $)	2020
Assets
Cash	$20
Accounts receivable	$20
Inventories	$60
Total current assets	$100
Plant & equipment (net)	$100
Total assets	$200
Liabilities & Equity
Accounts payable	$10
Notes payable	$20
Total current liabilities	$30
Long-term bonds	...