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skaggsy's review against another edition
5.0
I was supposed to read this during business school and of course I was a little twerp and decided I knew better and I didn't read it. It's a well written, easy to understand resource, and it'd have really helped me get better grades. The flip side is I'm reading it now when it will benefit my clients and that's what matters more.
bogfinchgirl's review against another edition
3.0
Had to read this for work. Could have been about a quarter of the pages. So much chatter and fluff. A good portion of it just repeated over and over again.
architr's review against another edition
5.0
One of the best books I have ever read!! It is:
1. a splendid Refresher Course for any finance professional
2. an incisive handbook for any non-finance person who is interested to understand financial statements/ operations of a business from a financial perspective
Note - This book has been published before "Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers" which is by the same authors.
Hence, please do not read the latter since the content is virtually the same as this book .
Standout features:
1. Authors make the content interesting by highlighting many cases of financial shenanigans committed by various companies. By reading this, non-finance people will appreciate the machinations. And finance people will be able to relate to the rationale behind introducing various Accounting Standards on revenue recognition, leases etc.
2. Detailed breakdown of financial statements, ratios and operations.
Useful insights from the book:
1. Accounting and finance are not reality, they are a reflection of reality, and the accuracy of that reflection depends on the ability of accountants and finance professionals to make reasonable
assumptions and to calculate reasonable estimates.
2. Finance is an art as much as it is a science; the financial statements are prepared using assumptions, estimates and biases.
3. In a familiar phrase generally attributed to Peter Drucker, profit is the sovereign criterion of the
enterprise. The use of the word sovereign is right on the money.
4. Income statement - Creating income statements for smaller business units has provided
managers in large corporations with enormous insights into their financial performance.
General Motors had developed this divisional system. (this fact has been mentioned in the book Relevance Lost)
5. Accrual v/s Pro forma income statement - Pro forma is a projection whilst accrual is based on actual numbers
6. You can think of operating expenses as the cholesterol in a business. Good cholesterol makes you healthy, while bad cholesterol clogs your arteries. Good operating expenses make your business strong, and bad operating expenses drag down your bottom line and prevent you from taking advantage of business opportunities. (Another name for bad operating expenses is “unnecessary bureaucracy.”
7. Relationship between Balance Sheet and Income Statement:
What is this relationship? Consider an analogy. Profitability is sort of like the grade you receive for a course in college. You spend a semester writing papers and taking exams. At the end of the semester, the instructor tallies your performance and gives you an A- or a C+ or whatever. Equity is more like your overall grade point average (GPA). Your GPA always reflects your cumulative performance, but at only one point in time. Any one grade affects it, but doesn’t determine it. The income statement affects the balance sheet much the way an individual grade affects your GPA. Make a profit in any given period, and the equity on your balance sheet will show an increase. Lose
money, and it will show a decrease. Over time, the equity section of the balance sheet shows the accumulation of profits or losses left in the business; the line is called retained earnings (losses) or sometimes accumulated earnings (deficit).
8. Cash is not equal to profit. The ultimate lesson here is that companies need both profit and cash. They are different, and a healthy business requires both.
9. There are four categories of ratios that managers and other stakeholders in a business typically use to analyze the company’s performance: profitability, leverage, liquidity, and efficiency.
Each type of ratio provides a different view - like looking into a house through windows on all four sides.
10. There are many more golden nuggets!!
I do hope you find this review useful. Please let me know your reviews after reading the book. Thanks!
1. a splendid Refresher Course for any finance professional
2. an incisive handbook for any non-finance person who is interested to understand financial statements/ operations of a business from a financial perspective
Note - This book has been published before "Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers" which is by the same authors.
Hence, please do not read the latter since the content is virtually the same as this book .
Standout features:
1. Authors make the content interesting by highlighting many cases of financial shenanigans committed by various companies. By reading this, non-finance people will appreciate the machinations. And finance people will be able to relate to the rationale behind introducing various Accounting Standards on revenue recognition, leases etc.
2. Detailed breakdown of financial statements, ratios and operations.
Useful insights from the book:
1. Accounting and finance are not reality, they are a reflection of reality, and the accuracy of that reflection depends on the ability of accountants and finance professionals to make reasonable
assumptions and to calculate reasonable estimates.
2. Finance is an art as much as it is a science; the financial statements are prepared using assumptions, estimates and biases.
3. In a familiar phrase generally attributed to Peter Drucker, profit is the sovereign criterion of the
enterprise. The use of the word sovereign is right on the money.
4. Income statement - Creating income statements for smaller business units has provided
managers in large corporations with enormous insights into their financial performance.
General Motors had developed this divisional system. (this fact has been mentioned in the book Relevance Lost)
5. Accrual v/s Pro forma income statement - Pro forma is a projection whilst accrual is based on actual numbers
6. You can think of operating expenses as the cholesterol in a business. Good cholesterol makes you healthy, while bad cholesterol clogs your arteries. Good operating expenses make your business strong, and bad operating expenses drag down your bottom line and prevent you from taking advantage of business opportunities. (Another name for bad operating expenses is “unnecessary bureaucracy.”
7. Relationship between Balance Sheet and Income Statement:
What is this relationship? Consider an analogy. Profitability is sort of like the grade you receive for a course in college. You spend a semester writing papers and taking exams. At the end of the semester, the instructor tallies your performance and gives you an A- or a C+ or whatever. Equity is more like your overall grade point average (GPA). Your GPA always reflects your cumulative performance, but at only one point in time. Any one grade affects it, but doesn’t determine it. The income statement affects the balance sheet much the way an individual grade affects your GPA. Make a profit in any given period, and the equity on your balance sheet will show an increase. Lose
money, and it will show a decrease. Over time, the equity section of the balance sheet shows the accumulation of profits or losses left in the business; the line is called retained earnings (losses) or sometimes accumulated earnings (deficit).
8. Cash is not equal to profit. The ultimate lesson here is that companies need both profit and cash. They are different, and a healthy business requires both.
9. There are four categories of ratios that managers and other stakeholders in a business typically use to analyze the company’s performance: profitability, leverage, liquidity, and efficiency.
Each type of ratio provides a different view - like looking into a house through windows on all four sides.
10. There are many more golden nuggets!!
I do hope you find this review useful. Please let me know your reviews after reading the book. Thanks!
unenvied9495's review against another edition
4.0
I started reading this book with practically no knowledge in neither accounting nor finance. But, I feel that the contents of the book are presented in such a way that even a person without in-depth knowledge of finance could understand it. Unfortunately, I feel that the provided explanations on some topics need further elaboration. Several times during the course of reading this book, I had to open my browser in order to ensure that my understanding of several concepts are not mistaken, because of the way that the given definitions are phrased could cause confusions for some people.
nrmaharaj's review against another edition
5.0
Absolutely a must-read for anyone who's wondered how money works inside an organization. Easily digestible and very sensibly laid out.
I should re-read it every 2 years to stay fresh.
I should re-read it every 2 years to stay fresh.
witaszaa's review against another edition
5.0
This book made my accounting class much easier. I wish all text books were this easy to read. It cover the basics that all managers should understand.
evan_oman's review against another edition
4.0
An excellent primer on basic accounting and business finance for the illiterate such as myself (profit and cash aren't the same -- who knew!). I really appreciated the focus on the manager's perspective, highlighting how a manager could use financial knowledge to benefit the company. They also included interesting popular financial stories (fraud, bankruptcies, etc.) to keep things interesting. Overall it was a very quick read.
Highly recommend to any person employed at a company who isn't already an accountant or financial professional.
Highly recommend to any person employed at a company who isn't already an accountant or financial professional.
_human's review against another edition
4.0
This is a good book for anyone wishing to:
-Read and understand their business's financial statements
-Learn how to figure how the financial health of their business using ratios
-Understand how cash really impacts their business
Great for anyone not financially saavy, who is responsible, to some degree, for financials!
-Read and understand their business's financial statements
-Learn how to figure how the financial health of their business using ratios
-Understand how cash really impacts their business
Great for anyone not financially saavy, who is responsible, to some degree, for financials!
michaelcul's review
3.0
so now I know how to effectively cut costs (some would call this cost employees) on the balance sheet for that shareholder value. thanks harvard business review!