kunzmann
commented
1 year ago General notes (not from discussion):
Chapter 3 - Why Increase Your Financial Intelligence?
Benefits to you:
- Stand out from the crowd
- Increase your ability to critically evaluate your company
- Goodwill: in an acquisition, difference between the net assets acquired and the amount paid
- Balance Sheet: reflection of assets, liabilities, and owner's equity at a point in time. On a specific day, what is owned, owed & value of the company.
- Better Understanding of the bias in the numbers
- can you question the data provided by finance & accounting?
- can you justify purchase decisions to your boss?
- can you push back when employees request equipment that may not actually be needed?
- The ability to use numbers and financial tools to make and analyse decisions
- Cash: money in the bank plus things that can easily be turned into cash (stocks, bonds, etc.)
Benefits to the company:
- Strength and Balance Throughout the Organization
- finance can't dominate decision making processes
- Better Decisions
- people with broader context can participate in analysis of numbers and opportunities
- Greater Alignment
Roadblocks:
- I don't like math:
- the math is easy
- I don't have access too data:
- even if you don't, knowing the concepts and terminology will enable you to ask good questions in management meetings
- boss doesn't want you to question numbers
- eventually they'll come around
- No time:
- Chapters are short & we included fun stories
Chapter 4 - The Rules Accountants Follow -- and why you don't always have to
(US) GAAP - Generally Accepted Accounting Principles FASB - fasby - Financial Accounting Standards Board AICPA - American Institute of Certified Public Accountants
apparently 100,000 pages of guidelines, not really rules
GAAP and similar guidelines provide consistency so that businesses can more easily be compared Also helps prevent dodgy practises going undetected - though it obviously still happens
The Key Principles
- Monetary Units and Historical Cost
- Things must be expressed as monetary units. Historical cost is what an asset cost to purchase.
- Conservatism
- Losses must be 'recognised' as soon as possible
- Gains should only be recorded when they actually happened
- Consistency
- Apply the guidelines in a consistent manner
- Full Disclosure
- When you change how you apply the guidelines, disclose the change and the effects of the change
- Materiality
- Record any financially significant event or situation. Including, for example, pending lawsuits that might have an impact, even if the likelihood is small.
International Standards
- Much of the world uses IFRS rather than GAAP - International Financial Reporting Standards
- US might switch to IFRS someday
Non-GAAP reporting
- some companies report non-GAAP numbers alongside GAAP numbers to remove financial events that might muddy the longer term picture
Part One - Toolbox
- Getting what you want
- make a case for a raise with financial numbers
- ask financial questions during interview process
- The players and what they do
- CFO - buck stops here. Oversees all financial functions
- Treasurer - managing relationships with banks, cash flow, forecasting, equity & capital-structure decisions. Finance professional with personality.
- Controller (aka comptroller) - bean counter, ensure other financial professionals are working with accurate numbers
- Reporting Obligations of public companies
- Annual report - SEC filings, etc.
Book: Financial Intelligence by Karen Berman and Joe Knight with John Case Link: https://financialintelligencebook.com/
Aiming to read: Part One: Section 3: Why Increase Your Financial Intelligence? Part One: Section 4: The Rules Accountants Follow—and Why You Don’t Always Have To
MC: @kunzmann Notes: @HashNotAdam
See you all at 12pm AEST, May 12th @ https://blackmill.co/meet
As always, if you'd like a calendar invite and/or access to Slack beforehand, get in touch via gday@blackmill.co.