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The Finance Book: Understand the numbers even if you're not a finance professional PDF

361 Pages·2017·4.387 MB·English
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M01 The Finance Book 23646.indd 1 31/03/2017 17:29 Praise for The Finance Book ‘Reduces the time required by management to understand the essentials of accounting and finance, enabling them to spend more time focusing on their core business’. Nasser Abbas, Joint Managing Director, Gearhouse SA (Pty) Ltd ‘This book is set out clearly and is often transformational. This is the go-to source for clarity on how financial language and structures relate to real life business situations.’ Derek Ion, Projects Director, Annesbrook Holdings Ltd (NZ) ‘If you need a clear introduction to the critical concepts of finance then this book delivers it. A highly intuitive structure means readers can dip in and out and learn as they go.’ Ken Lee, Head of European Equity Research, Barclays ‘A really helpful, well organised and easy to understand primer and reference book for those who aren’t accountants but still need to understand the accounts ’. Roger Siddle, Chairman, Cordium Group ‘Language is a key to understanding any field of specialty, and in this book Warner and Hussain have managed to distill principles of finance and accounting in such a way that the language that often mystifies non-practitioners is clearly explained and meaningful. I wish I’d had access to this book when I started my career in management. The Finance Book is an excellent reference and a handy resource for any professional; it will be indispensable to aspiring managers.  In the business world accountancy and finance are the ring that binds managers, and this book clarifies and explains concepts; for many it covers familiar territory, but for most non-financial professionals it will also provide the information to fill the inevitable gaps in our knowledge.  Warner and Hussain explain in a straightforward and clear manner the concepts that baffle many managers from a non-financial background early in their careers.  The language of business is presented unambiguously with relevant examples that enable the reader to quickly grasp and embed concepts.’ André Snoxall, Director, Russau Consulting ‘A great book. At last, a guide that demystifies and encourages business owners to practically understand financial matters. A must read.’ Gordon Vater, CEO, RiiG Limited A01 The Finance Book 23646.indd 1 20/03/2017 17:02 ‘This is fantastic! Full of real-time insights for business people who haven’t studied accountancy.’ Daniel Feather, Partner, EY London ‘I wish I’d had a book like this at the start of my career! The bite-sized summaries at the start of each chapter are a smart time saver for any busy business professional.’ Ben Grover, Finance Director, UBM EMEA ‘Essential reading for any non-finance professional. This is an easy to read and practical guide to the world of finance.’   Paul Herman, Group CEO, Bluebox Corporate Finance ‘As an experienced CFO I can see the business value in all employees, not just those in finance, having financial awareness and understanding. The Finance Book does an excellent job in making finance accessible and articulating clearly its relevance in practice.’ Phil Mickler, CFO, Jack Wills ‘A clear, concise and straightforward introduction to the world of accounting and finance - which, to non-accountants, too often seems nothing of the sort’. Tessa Park, Technical Partner, Kingston Smith LLP ‘The financial aspect of business is so important. This invaluable book helps make finance simple and understandable and is a must-read.’  Martin Port, CEO, BigChange Apps ‘The most user-friendly book for non-finance professionals I’ve ever seen! Finance is the lifeblood of a business. Read this book and help your business live and succeed.’ Daniel Mark, Chief Financial Officer, Adstream ‘This book is a thorough and well-organised overview for the non-finance professional. Si Hussain has spent many years in the educational field, and this comes through in the clarity of explanation and the numerous practical examples. A must-have for the manager who is climbing the management mountain.’ David Parmenter, author, Key Performance Indicators and The Financial Controllers and CFO Toolkit A01 The Finance Book 23646.indd 2 20/03/2017 17:02 The Finance Book A01 The Finance Book 23646.indd 3 20/03/2017 17:02 At Pearson, we believe in learning – all kinds of learning for all kinds of people. Whether it’s at home, in the classroom or in the workplace, learning is the key to improving our life chances. That’s why we’re working with leading authors to bring you the latest thinking and best practices, so you can get better at the things that are important to you. You can learn on the page or on the move, and with content that’s always crafted to help you understand quickly and apply what you’ve learned. If you want to upgrade your personal skills or accelerate your career, become a more effective leader or more powerful communicator, discover new opportunities or simply find more inspiration, we can help you make progress in your work and life. Every day our work helps learning flourish, and wherever learning flourishes, so do people. To learn more, please visit us at www.pearson.com/uk The Financial Times With a worldwide network of highly respected journalists, The Financial Times provides global business news, insightful opinion and expert analysis of business, finance and politics. With over 500 journalists reporting from 50 countries worldwide, our in-depth coverage of international news is objectively reported and analysed from an independent, global perspective. To find out more, visit www.ft.com A01 The Finance Book 23646.indd 4 20/03/2017 17:02 The Finance Book Stuart Warner and Si Hussain Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney Dubai • Singapore • Hong Kong • Tokyo • Seoul • Taipei • New Delhi Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan A01 The Finance Book 23646.indd 5 20/03/2017 17:02 PEARSON EDUCATION LIMITED Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk First edition published 2017 (print and electronic) © Stuart Warner and Si Hussain 2017 (print and electronic) The rights of Stuart Warner and Si Hussain to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Barnard’s Inn, 86 Fetter Lane, London EC4A 1EN. The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publisher, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law. Any unauthorised distribution or use of this text may be a direct infringement of the authors’ and the publisher’s rights and those responsible may be liable in law accordingly. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the authors or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. Pearson Education is not responsible for the content of third-party internet sites. ISBN: 978-1-292-12364-6 (print) 978-1-292-12367-7 (PDF) 978-1-292-12365-3 (ePub) British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for the print edition is available from the Library of Congress 10 9 8 7 6 5 4 3 2 1 21 20 19 18 17 Cover design by David Carroll & Co Print edition typeset in Stone Serif ITC Pro by 9/13 by SPi Global Print edition printed and bound in Great Britain by Ashford Colour Press Ltd, Gosport, Hampshire NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION A01 The Finance Book 23646.indd 6 20/03/2017 17:02 Contents About the authors/ix Acknowledgements/xi Introduction/xii part 1 Finance fundamentals/1 1 Finance personnel and systems/3 2 Cash versus accruals accounting/16 part 2 Primary financial statements/21 3 Profit and loss (P&L)/23 4 The balance sheet/30 5 Cash flow statement/37 part 3 Key elements of financial statements/43 6 Revenue recognition/45 7 Opex and capex/51 8 Business tax/56 9 Tangible fixed assets and depreciation/66 10 Goodwill and other intangibles/74 11 Stock/80 12 Debtors and creditors/88 13 Prepayments and accruals/95 14 Provisions and contingencies/102 15 Capital and reserves/111 16 Group accounting/120 A01 The Finance Book 23646.indd 7 20/03/2017 17:02 viii Contents 17 Revaluation/127 18 Impairment/135 part 4 Financial and regulatory environment/141 19 Accounting and financial reporting standards/143 20 External financial audit/149 21 Information in the public domain/157 22 Corporate governance and whistleblowing/164 part 5 Assessing financial health/175 23 Profitability performance measures/177 24 Working capital and liquidity management/186 25 Insolvency and going concern risk/194 26 Long-term solvency performance measures/202 27 Investor ratios/210 28 Business valuation/221 part 6 Sources of business finance/231 29 Equity finance/233 30 Debt finance/243 part 7 Financial management/251 31 Management accounts/253 32 Profitable pricing/260 33 Profit planning/268 34 Budgeting and forecasting/278 35 Investment appraisal/287 Appendix: Greggs 2015 Accounts /295 Glossary/325 Further resources/333 Index/335 A01 The Finance Book 23646.indd 8 20/03/2017 17:02 About the authors Stuart Warner Bsc (Hons) FCA is the author of four books on finance, an international speaker, a teacher and a non-executive adviser. His goal is to help businesses increase productivity and profits through innovative and engaging finance training. He delivers finance based training programmes around the world across multiple sectors. Over his career, Stuart has trained over ten thousand people. He has taught accounting trainees for professional qualifications, and has delivered CPD courses for qualified accountants and interactive courses for non-finance professionals from graduate to board level. Stuart studied management sciences at UMIST and became a Chartered Accountant whilst working at PwC. Stuart loves the fresh air and peace of the countryside, especially the scenic hills of North Wales, so he decided to live in London for ample doses of air pollution, loud noises and views of tall concrete buildings. In his spare time he can be found falling off his mountain bike or falling off walls whilst indoor rock climbing. Saieem (Si) Hussain BSc (Hons) FCA is a chartered accountant. He trained at KPMG and qualified in 1990. Si has spent 25+ years delivering financial and business training programmes to thousands of professionals. He has held senior positions in several listed companies, including Chief Executive of BPP Professional Education. Si runs an independent consultancy delivering financial and business training, including coaching to senior executives. He A01 The Finance Book 23646.indd 9 20/03/2017 17:02

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