“above the line,”
accounting software
accounts payable (A/P)
definition
working capital and
accounts payable period
accounts receivable (A/R)
days sales outstanding ratio and
definition
improving cash position and
working capital and
accounts receivable aging
accounts receivable period
accrual accounting
accrued assets
accrued expenses
accumulated depreciation
accumulated earnings. See retained earnings
accumulated profit/loss. See retained earnings
acid-test (quick) ratio
acquisitions
cash conversion cycle and
definition
due diligence on
as growth strategy
actual income statement
additional paid-in capital
Adobe
advertising, allocating costs of
aging of accounts receivable
airline industry
“allowance for bad debt,”
amortization
angel investors
A/P. See accounts payable
A/R. See accounts receivable
art of finance
accumulated depreciation
analysis of capital expenditures
cash flow estimates
cash least affected by
depreciation
entrepreneurs and
figuring future value
financial intelligence and
in formulas and calculations
primer on
toolbox
understanding
valuation of companies
asset(s)
accounts receivable
accruals and prepaid assets
cash and cash equivalents
current assets
depreciation of (see depreciation)
efficiency in use of
employees as
generating income from fixed assets
goodwill
incentive to undervalue
intangible (see intangible assets)
intellectual property, patents, and other intangibles
inventory
liquid assets
property, plant, and equipment
of service companies
total asset turnover
used in company valuation
asset turnover ratio
asset valuation method
assumptions
about cash flow
about depreciation
by accountants
in analysis of capital expenditures
awareness of
biases due to
in calculating ROE
in calculation of future value
in income statement
NPV calculations based on
in profitability ratios
AT&T
average collection period. See days sales outstanding
bad-debt reserve
balance sheet
achieving profit
assets shown in (see asset[s])
basics of
calculating cash flow statement from
comparative data presented in
definition
effect of profit on equity
effects of income statement on
employees as assets
expenses vs. capital expenditures
financial intelligence exercise
footnotes to
health of company and
liabilities shown in (see liabilities)
managing
owners’ equity shown in (see owners’ equity)
reading
reasons for balance
samples of
toolbox
balance sheet levers
bankers, relationship with
Bank of America
“below the line,”
Berkshire Hathaway
Berman, Karen
biases
in determining gross profit
due to estimates and assumptions
need to be careful about
in operating profit
in restructuring charges
Big Dog Holdings, Inc.
bill-and-hold technique
biotech firms
BLI. See Business Literacy Institute
book value of company
“bottom line.” See net profit
Buffett, Warren
Build-A-Bear Workshop, Inc.
Burger King
Burlingham, Bo
burn rate
business growth
adding products and services
branching out
financial intelligence and
going public
keeping same basic business
through acquisitions
Business Literacy Institute (BLI)
buying back stock
capital
additional paid-in capital
cost of
cost of, hurdle rate and
definition
as part of owners’ equity
working (see working capital)
capital budgeting process
capital expenditures
analysis of
definition
expenses contrasted with
initial cash outlay for
not charged against revenue
owner earnings and
shown in balance sheet
capital expenditures, analysis of
internal rate of return (IRR) method
to justify decision
net present value (NPV) method
payback method
sensitivity analysis
step-by-step guide to
capital leases
Case, John
cash. See also cash flow(s); cash flow statement
available, inventory management and
definition
importance of
inventory and
language of cash flow (see cash flow [s] )
from or used in financing activities
from or used in investing activities
from or used in operating activities
profit contrasted with
profit without
as reality check
reconciling profit to
toolbox
without profit
cash-based accounting
cash-based businesses
cash conversion cycle
cash flow(s)
assumptions about
estimating timing of
free cash flow
cash flow(s) (continued)
future, for capital expenditures
importance of
as key measure of performance
power of understanding
profitability and
as reflection of cash transactions
used in company valuation
cash flow estimates
cash flow forecasts, for loan application
cash flow statement. See also cash; cash flow(s)
definition
financial health of company and
financial intelligence exercise
financial literacy and
income statement compared
for realistic company (sample)
reconciling profit to cash
samples of
for start-up company (sample)
Cendant
Center for Effective Organizations
CEO. See chief executive officer
CFO. See chief financial officer
channel stuffing
Charan, Ram
chief executive officer (CEO)
chief financial officer (CFO)
Cisco Systems
Clif Bar
COGS. See cost of goods sold
common stock (shares)
buying back
employee stock ownership plans
inflated prices of
comparative income statements
compensation. See employee compensation; payroll
Computer Associates
Conley, Chip
conservatism
consistency
consolidated income statement
context of financial information
controller (comptroller)
copyrights
corporate culture
corporate entrepreneur(s)
Corporate Library Research Group
corporate shells
COS. See cost of services
cost of capital
cost of goods sold (COGS)
definition
in DII ratio
effect on gross profit
gross margin and
shown in income statement
as variable costs
cost of services (COS)
definition
gross margin and
shown in income statement
creditors
credit policies
Crocs, Inc.
current assets
current liabilities
current portion of long-term debt
current ratio
dashboards
date of balance sheet
days in inventory (DII)
days payable outstanding (DPO)
days sales outstanding (DSO)
aging of receivables and
cash conversion cycle and
reducing
working capital and
debt financing
debt-to-equity ratio
Dell Computer
Denison, Daniel R.
depreciation
assumptions in
definition
EBITDA and,
matching principle and
straight-line method
write-off of
DII. See days in inventory
direct costs
discounted cash flow method of valuation
discounted value of future cash flows
discounting equation
dividends
on common shares
definition
on preferred shares
divisional system
dot-com boom
DPO. See days payable outstanding
Drucker, Peter
DSO. See days sales outstanding
Dun & Bradstreet (D&B) ratings
Dunlap, Al (“Chainsaw Al”). See also Sunbeam
bill-and-hold scam
downsizing by
earnings. See also profit
accumulated
net earnings (see net profit)
owner earnings
“smoothing,”
used in company valuation
earnings before interest, taxes, depreciation, and amortization (EBITDA)
earnings before interest and taxes (EBIT)
earnings per share (EPS)
earnings statement. See income statement
eBay
balance sheet exercise
cash flow statement exercise
income statement exercise
ratios exercise
sample financial statements
EBIT. See earnings before interest and taxes
EBITDA. See earnings before interest, taxes, depreciation, and amortization
ECCO
economic order quantity
efficiency ratios
days payable outstanding (DPO)
days sales outstanding (DSO)
inventory days
inventory turns
property, plant, and equipment turnover
total asset turnover
employee(s)
as assets
equity participation for
financial literacy for
employee compensation
changes in, understanding
deferred, as long-term liability
deferred bonuses as long-term liability
salaries treated as COGS or COS
employee involvement
employee satisfaction
employee stock ownership plans
Enron Corporation
EPS (earnings per share)
equity. See also owners’ equity
definition
effect of profit on
return on (ROE)
shown in balance sheet
equity financing
equity investment
equity participation for employees
Erickson, Gary
estimates
by accountants
in analysis of capital expenditures
awareness of
bad-debt reserve
bias introduced by
in calculating cash flow
in calculating ROE
cash flow estimates
in cost allocation
footnote regarding
in income statement
manipulation of financial information
NPV calculations based on
in profitability ratios
profit as
expenses
accrued
amortization(see also amortization)
capital expenditures contrasted with
cost of goods sold (COGS) or cost of services (COS)
depreciation(see also depreciation)
G&A or SG&A
improving cash position and
matched to revenue
noncash expenses
one-time charges
operating expenses(see also operating expenses)
R&D expenses
extraordinary items
FASB. See Financial Accounting Standards Board
fast-food chains
Fastow, Andrew
favorable variance
Federal Reserve
Financial Accounting Standards Board (FASB)
financial calculators
financial capital
financial intelligence
business growth and
financial reports as foundation of
as learned skill set
of management team
roadblocks to
Financial Intelligence book series
financial intelligence exercises
balance sheet exercise
cash flow statement exercise
income statement exercise
ratios exercise
financial leverage
financial literacy
for all employees
management philosophy based on
scoreboards and visual aids
strategies for
weekly “numbers” meetings
financial literacy training
financially intelligent companies
financial literacy and (see financial literacy)
growing businesses (see business growth)
open-book management
Sarbanes-Oxley Act of 2002,
toolbox
financial projections
financial ratios. See ratios
financial statements
audited
footnotes to
as foundation of financial intelligence
of privately held companies
of publicly traded companies
financial statements (samples)
balance sheet
cash flow statement
income statement
financing activities
“Fine Cigar Shops” example
finished-goods inventory
fiscal year
fixed assets. See property, plant, and equipment
fixed costs
footnotes to financial statements
Ford Motor Company
forecasts
Form 10-K
format of balance sheet
formulas and calculations
cash conversion cycle
cost of capital
current ratio
days in inventory (DII)
days payable outstanding (DPO)
days sales outstanding (DSO)
debt-to-equity ratio
discounting equation
free cash flow
gross profit margin percentage
interest coverage ratio
inventory turns ratio
net present value
operating profit margin percentage
payback method
percent of/percent change
PPE turnover ratio
quick (acid-test) ratio
return on assets (ROA)
return on equity (ROE)
sustainable growth rate
total asset turnover
working capital
Fortune magazine
franchisors
frauds and scandals
capital expenditures vs. operating expenses
Cendant
Enron Corporation
most common sources of
revenue recognition
Sarbanes-Oxley Act of 2002 and
Sunbeam (see Sunbeam)
Tyco International
Waste Management Inc.
WorldCom
Xerox
free cash flow
fundamental accounting equation
future cash flows
for capital expenditures
discounted value of, NPV based on
future value
future value calculator
GAAP. See generally accepted accounting principles
general and administrative expenses (G&A)
General Electric
generally accepted accounting principles (GAAP)
General Motors
goodwill
Great Game of Business, The (Stack & Burlingham)
gross margin. See gross profit margin percentage
gross profit
gross profit margin percentage
Hewlett-Packard
hurdle rate
in calculating IRR
in calculating NPV
cost of capital and
IBM
IMAX Corporation
income. See also profit
measured in accrual accounting
net income (see net profit)
operating income
pressures for manipulation of
income statement
“actual” vs. “pro forma,”
cash flow statement and
comparative
consolidated
costs and expenses shown in
definition
divisional system for
effects on balance sheet
estimates and assumptions in
financial intelligence exercise
footnotes to
gross profit shown in
label of
operating expenses shown in
percent of and percent change
percent of sales shown in
purpose of
reading and understanding
revenue
samples of
toolbox
understanding language of
variance shown in
individual financial worth
industry averages
industry standards
industry variations
information sharing
initial public offerings (IPOs)
intangible assets
goodwill
patents and copyrights
R&D expenses
rules for amortization of
valuation of
intellectual property
interest coverage ratio
internal controls
internal rate of return (IRR) method
of analyzing capital expenditures
comparison with other methods
inventory
as asset
days in inventory (DII)
finished-goods inventory
improving cash position and
just-in-time inventory management
managing, working capital and
not included in quick ratio
raw-materials inventory
reducing
working capital and
work-in-process (WIP)
inventory days
inventory period
inventory turns
inventory valuation
investors
“angel” investors
bullish or bearish
interest in balance sheet
interest in operating profit
preferred shares issued to
ROE as key ratio for
use of ratios
venture capitalists
IPOs (initial public offerings)
IRR (internal rate of return) method
Johnson, H. Thomas
Johnson & Johnson
Joie de Vivre Hospitality
just-in-time inventory management
Kant, Immanuel
Kaplan, Robert S.
key performance indicators (KPIs)
Kmart
Knight, Joe
KPIs. See key performance indicators
label of income statement
land, valuation of
laws
Sarbanes-Oxley Act of 2002,
Securities Exchange Act of 1934,
layoffs
lean enterprise principles
lean manufacturing
learning. See also training
financial intelligence as learned skill set
involvement in
reinforcement of
leases
leverage
leverage ratios
debt-to-equity ratio
interest coverage ratio
liabilities
accounts payable
accrued expenses
current portion of long-term debt
long-term liabilities
other short-term liabilities
short-term loans
liquid assets
liquidity ratios
current ratio
quick ratio
loans
as long-term liabilities
personal, forbidden by SOX
raising cash through borrowing
relationship with banker and
shown in balance sheet
long-term assets
long-term liabilities
Macromedia
managing balance sheet
market cap
market value of company
matching principle
accrued liabilities and
definition
illustrated
mergers. See acquisitions
Merrill, Dave
Microsoft Corporation
Money Maps
Nathan’s Famous, Inc.
net margin. See net profit margin percentage
net present value (NPV) method
of analyzing capital expenditures
comparison with other methods
net profit
definition
effect on equity
fixes for low profitability
reconciling to cash
net profit margin percentage
noncash charges
noncash expenses
nonprofit organizations
NPV (net present value) method
office politics
one-time charges
open-book management
Open-Book Management (Case)
open communication
operating expenses
capital expenditures contrasted with
cutting
definition
operating income. See operating profit
operating leases
operating leverage
operating margin. See operating profit margin percentage
operating profit
operating profit margin percentage
operating statement. See income statement
opportunity cost
overhead. See operating expenses
overleveraged companies
owner earnings
owner financing
owners’ equity
additional paid-in capital
common shares
preferred shares
retained earnings
Packard, David
Paine Webber
Parmalat
par value of stock
patents
payback method
analyzing capital expenditures with
comparison with other methods
payroll. See also employee compensation
as accrued expense
recording
payroll services firms
percent change, calculating
percent of, calculating
percent of sales ratio
personal finances
as collateral for loan
individual financial worth
investment in business
separate from company finances
time value of money in
Peter, Laurence J.
Peter Principle, The (Peter)
Pfeffer, Jeffrey
physical capital
P&L statement. See income statement
point in time, of balance sheet
PPE. See property, plant, and equipment
preferred shares
prepaid assets
prepaid rent
present value
pretax charge
price-to-earnings ratio
privately held companies
distribution of dividends
financial statements of
market vs. book value of
stock buybacks
valuation of
production costs
production cycle
profit. See also earnings; income
cash contrasted with
cash without
definition
effect on equity
as estimate
forms of
gross profit
measured in accrual accounting
net profit (see net profit)
operating profit
reconciling to cash
reinvested in business
without cash
profitability
cash contrasted with
cash flow and
definition
low, fixes for
skewed picture of
profitability ratios
derived from income statement
gross profit margin percentage
net profit margin percentage
operating profit margin percentage
return on assets
return on equity
profit and loss statement. See income statement
pro forma income statement
project-based companies
property, plant, and equipment (PPE)
adjustments for depreciation
PPE turnover
reducing purchase of
proposals, written
Public Company Accounting Oversight Board
publicly traded companies
cash flow statements of
distribution of dividends
footnoted financial statements
free cash flow disclosure not required
market vs. book value of
price-to-earnings ratio of
restructuring charges by
valued by stock market
purchase price for PPE
QuickBooks accounting software
quick (acid-test) ratio
ratios
accounting tricks with
analyzing
asset turnover ratio
calculating (see formulas and calculations)
current ratio
days in inventory (DII)
days payable outstanding (DPO)
days sales outstanding (DSO) (see days sales outstanding)
debt-to-equity ratio
efficiency ratios
financial intelligence exercises
gross profit margin percentage
interest coverage ratio
inventory turns
leverage ratios
liquidity ratios
net profit margin percentage
operating profit margin percentage
percent of sales
power of
profitability ratios
property, plant, and equipment turnover
quick (acid-test) ratio
return on assets (ROA)
return on equity (ROE)
return on investment (ROI) (see return on investment)
sustainable growth rate
toolbox
total asset turnover
raw materials
raw-materials inventory
reasonable-and-consistent test
receivable days. See days sales outstanding
reconciliation
recording revenue. See revenue recognition
relationships with vendors
Relevance Lost (Johnson & Kaplan)
replication strategy
reputation for slow payments
required rate of return. See hurdle rate
research and development (R&D)
restaurant chains
restaurants
restructuring charges
retail chains
retailers
retained earnings
return on assets (ROA)
return on equity (ROE)
return on investment (ROI). See also capital expenditures
analyzing capital expenditures
building blocks of
comparison of methods
definition
future value in
hurdle rate in
internal rate of return method
net present value method
payback method
present value in
toolbox
return on sales (ROS)
revenue. See also sales
as basis of profit
expenses matched to
measured in accrual accounting
recorded at sale
shown in income statement
revenue recognition
effect on gross profit
guidelines for
income statement and
issue of when sales are recorded
manipulation of
risk(s)
in capital expenditures
of debt financing
entrepreneur’s willingness to take
of growing business
hurdle rate and
leverage and
smaller customers as
time value of money and
Rite-Aid
ROA (return on assets)
roadblocks to financial intelligence
Rocky Mountain Chocolate Factory
ROE (return on equity)
ROI. See return on investment
roll-ups
ROS (return on sales)
Saginaw, Paul
salaries
sales. See also revenue
definition
increasing
measured in accrual accounting
revenue recorded at time of
shown in income statement
sales, general, and administrative expenses (SG&A)
sales managers
salespeople
Sarbanes-Oxley Act of 2002,
scale, issue of, IRR and
scoreboards
Securities Exchange Act of 1934,
selling expenses
sensitivity analysis
Setpoint
shareholders’ equity. See owners’ equity
Shore, Andrew
short-term liabilities
short-term loans
Small Giants (Burlingham)
“smoothing” earnings
solvency
sources of capital
SOX. See Sarbanes-Oxley Act of 2002
Stack, Jack
Starbucks
start-up companies
statement of earnings. See income statement
statement of operations. See income statement
stock
buybacks
common stock (see common stock)
dividends on
preferred stock (see preferred shares)
stockholders’ equity. See owners’ equity
stock market
stockout
straight-line depreciation
Sullivan, Scott
Sunbeam
bill-and-hold scam
downsizing of
sustainable growth rate
“Sweet Dreams Bakery” example
“taking the big bath,”
Target Stores
taxes
time period covered by income statement
time value of money
toolboxes
art of finance
balance sheet
building financial staff
cash accounting
employees as asset
expenses vs. capital expenditures
financially intelligent companies
financing a business
free cash flow
income statement
open-book management
percent of and percent change
percent of sales
power of ratios
ratios
return on investment (ROI)
Sarbanes-Oxley Act of 2002,
sustainable growth rate
variance
working capital
total asset turnover
Toyota
training. See also learning
financial literacy training
training businesses
in understanding business
transparency
treasurer
trend lines
Tyco International
Ultralife Batteries
Under Armour
balance sheet exercise
cash flow statement exercise
income statement exercise
ratios exercise
sample financial statements
unfavorable variance
unit costs
unusual items in balance sheet
U.S. Marine Corps
Useem, Jerry
useful life of assets
valuation of companies
variable costs
variances
VCs. See venture capitalists
vendors
venture capitalists (VCs)
visual aids
voting rights
Wall Street
earnings “smoothing” and
focus on free cash flow
impressed by Sunbeam stock price
interest in operating profit
pressures for income manipulation
Wall Street Journal
Wal-Mart Stores
Warfighting (U.S. Marine Corps)
Waste Management Inc. (WMI)
Web tools
weekly “numbers” meetings
Weinzweig, Ari
WIP (work-in-process) inventory
WMI. See Waste Management Inc.
working capital
balance sheet levers
balance sheet management
cash conversion cycle
days sales outstanding and
elements of
inventory management and
production cycle illustrated
relationship with banker
work-in-process inventory (WIP)
WorldCom
write-downs
write-offs
Xerox
year-to-year trends
Zimmer, Ed
Zingerman’s