Guide to Financial Management

Guide to Financial Management

John Tennent

Language: English

Pages: 327

ISBN: 186197809X

Format: PDF / Kindle (mobi) / ePub

With organizations driven to deliver on performance targets, such as shareholder value or level of service, managers are expected to make decisions fully understanding their financial consequences. Few nonfinancial specialists are prepared for the responsibilities of dealing with management reports, budgets, and capital proposals. Many find themselves confused by jargon and embarrassed by their lack of understanding.

Guide to Financial Management is a practical resource for understanding and managing these financial responsibilities. It is structured by task, such as “how to assemble a budget” or “how to construct a proposal to invest in new equipment.”

John Tennent—who has worked with such major companies as Kraft, Thomson, British Airways, Unilever, and Universal Music—helps the reader understand financial jargon, financial statements, performance measures, budgeting, costing, pricing, decision making, and investment appraisals—all of which are key to being a successful manager.





















costs involved as soon as the decision to undertake the recall campaign has been made.” Therefore the costs of any warranty work are anticipated and charged against profits in the year the car is sold rather than being left until they are incurred. Overall, the focus in a business should be not just how to make the provision more accurate but also to find the source of any faults, improve quality and reduce the incidence of repair. Abandonment The principle of recognising future

have a predictable element (sales revenue) and an unpredictable element (asset purchases and disposals). It would be unwise for a business to lock itself into long-term debt and then find that it had started generating a substantial cash surplus. Thus a portfolio of debt should be structured with a series of loans that mature over a range of dates. This should also include a small amount of short-term debt (or overdraft) to balance out day-to-day cash receipts and payments. As each part of the

The more refined the process becomes, the more data are required and the more cost is incurred in identifying, capturing and calculating the product cost. Therefore investing in costing detail should only be done to rationalise the portfolio. For day-to-day management it may be interesting information, but a focus on driving value for money from each cost is often more effective. Assuming that 100,000 tubs of ice cream are to be made, the cost of one tub is shown in Table 7.5. TABLE 7.5 The

would cost the business 16.4%, which is calculated as follows: This is known as the weighted average cost of capital (WACC). For a business to be successful and satisfy its investors it must earn at least this rate on its operating activities. A combination of the two sources of finance provides an optimal way to raise funds and build a business. A business with debt usually has a lower WACC than one without. A low WACC can therefore create more value for the shareholders out of the projects

G., The Economist Guide to Business Modelling, 3rd edition, Profile Books, 2011. Tennent, J., The Economist Guide to Cash Management, Profile Books, 2012. Vause, Bob, The Economist Guide to Analysing Companies, 5th edition, Profile Books, 2009. Additional information has been drawn from numerous websites, both corporate and encyclopaedic. Index Page numbers in italics indicate figures; those in bold type indicate tables. See also the List of companies on pages 341–343. 10K report (US)

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