The Manager's Pocket Calculator: A Quick Guide to Essential Business Formulas and Ratios

by Thomsett, Michael C.

ISBN13:

9780814416358

ISBN10:

0814416357

Format:

Paperback

Pub. Date:

10/6/2010

Publisher(s):

Amacom Books

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Summary

Your success or failure is reflected in one number: the bottom line. So you'd better get a handle on the numbers that influence it. The Manager's Pocket Calculator gives you the essentials of budgeting and forecasting, financial analysis, reporting, interest and rate-of-return calculation, statistics, and more. Not just an overview, the book contains more than 100 formulas and ratios with numerical examples, spreadsheet entries, and step-by-step calculations. The Manager's Pocket Calculator trains you in the application of mission-critical business fundamentals, better preparing you to: prepare and justify budgets; excel in planning meetings concerning financial performance; create reports and presentations demonstrating financial outcomes; communicate with internal and external accounting, auditing and other financial entities. An indispensible, everyday business tool, The Manager's Pocket Calculator makes you more than a manager. It makes you a powerful architect of your organization's financial stability.

Author Biography

MICHAEL C. THOMSETT is the author of several books including The Little Black Book of Project Management, The Real Estate Investor’s Pocket Calculator, The Stock Investor’s Pocket Calculator, and Getting Started in Options. He is a former accounting and financial services professional and consultant.

Introduction: The Basic Problem with Numbers	p. ix
Compound Interest: The Power of Money	p. 1
Time Value of Money: The Concept	p. 2
Accumulated Value of a Series of Deposits	p. 19
Looking Ahead	p. 22
Present Value and Sinking Funds	p. 23
Present Value of a Single Deposit	p. 24
Sinking Fund Payments and Present Value per Period	p. 27
Loan Amortization	p. 31
Reading Loan Amortization Tables	p. 38
Annual Percentage Rate	p. 44
Looking Ahead	p. 45
Rates of Return	p. 46
Return on Revenue and Equity	p. 46
Cash Return and Cash Flow	p. 53
Returns on Purchases and Sales	p. 58
Investment-Based Returns	p. 61
Annualized Return	p. 65
Looking Ahead	p. 67
Calculating Breakeven and After-Tax Profit	p. 68
Hidden Costs	p. 68
The Inflation Effect	p. 73
Taxes in the Profitability Equation	p. 76
Breakeven Calculations: Inflation and Taxes	p. 79
Calculating Cash Flow	p. 83
Looking Ahead	p. 86
Financial Reporting Formulas: The Balance Sheet	p. 87
Balance Sheet Basics	p. 87
Working Capital Ratios	p. 91
Ratios Showing Management of Working Capital	p. 94
Capitalization Ratios	p. 99
Combined Ratios	p. 105
Looking Ahead	p. 108
Financial Reporting Formulas: The Income Statement	p. 109
Income Statement Basics	p. 111
Dollar and Percentage Reporting	p. 115
Cost of Goods Sold Relationships	p. 121
Revenue and Profitability Trends	p. 125
Core Earnings	p. 127
Looking Ahead	p. 128
Depreciation Calculations	p. 130
Basic Depreciation Rules	p. 131
Straight-Line and Declining Balance Depreciation	p. 132
Class Lives and Recovery Periods	p. 136
Depreciation Calculations for Real Estate	p. 140
Home Office Depreciation	p. 145
Amortization	p. 147
Looking Ahead	p. 149
Bringing Reports to Life: Powerful Arguments with the Numbers	p. 150
Picking Your Report Format	p. 151
Narrative Sections	p. 153
Financial Sections	p. 158
Combining Narrative and Financial Content	p. 161
Graphics in Reports	p. 164
Looking Ahead	p. 166
Budgeting Calculations: Assumptions and Prorations	p. 168
Documenting Your Assumptions	p. 169
Addressing the Expense Issues	p. 172
Prorating Expense Estimates	p. 175
Calculating Variances	p. 177
Revising Budgets	p. 180
The Nature of Revenue Forecasts	p. 182
Looking Ahead	p. 185
Statics for Effective Reporting	p. 186
Management Application of Statistics	p. 186
Statistical Averages	p. 190
Dispersion, Variance, and Deviation	p. 196
Accuracy in Statistics	p. 202
Looking Ahead	p. 206
Incredible Math Shortcuts	p. 207
Addition Shortcuts	p. 207
Subtraction Shortcuts	p. 211
Logical Rules	p. 214
Multiplication Shortcuts	p. 216
Division Shortcuts	p. 225
Looking Ahead	p. 226
Incredible Conversion, Measurement, and Time Shortcuts	p. 227
Conversion	p. 227
Measurements	p. 236
Time Shortcuts	p. 241
Appendix: Summary of Formulas	p. 245
Index	p. 269
Table of Contents provided by Ingram. All Rights Reserved.

Excerpts

<html><head></head><body>I N T R O D U C T I O N The Basic Problem with Numbers It’s all in the numbers. Everyone has heard this statement and it is true. Your performance is invariably judged by how much profit you create or by how much cost you incur in your segment, team, or department. The so-called bottom line—profit or loss—is the universal means for monitoring performance and for determining whether an initiative was worthwhile. With the dominance of the bottom line in every aspect of how your performance is graded, you have a distinct advantage if you are skilled at conveying information in terms of profitability. Conversely, you are at a distinct disadvantage if you cannot communicate the profit or loss aspects of your work to management. On a most basic level, just asking management for something is less effective than demonstrating how an approval is going to create additional profits or cut costs (related directly to revenues) and expenses (overhead, not related directly to revenues). This is the rudimentary distinction between managers with communication skills and those who struggle every day trying to find the best way to communicate what they know and what they have achieved. If you do not have background and education in finance, you probably struggle with these issues on a daily basis. Even those with training in accounting may find it difficult to summarize their requests in plain, simple, and clear terms for management. No one is immune from the difficulty in matching numerical information with a request or recommendation. For some, even if the numerical aspects of the job are comfortable, conveying their significance to management can be very difficult. For others, even those with exceptional communication skills, reducing the numbers (‘‘crunching’’) to the basics is the real challenge. Your purpose in making effective use of numerical information is to convey the essential data that management needs to make an informed decision—and to make your case convincingly. Faced with an unending array of choices, management’s desire is to make choices that are not only the most profitable but that also involve the least risk. It is not enough to demonstrate that a decision is likely to be profitable if it also incurs unacceptable risks: potential liability, supply chain losses, reduced customer satisfaction, or damage to brand and reputation. When an esteemed company like Mattel contracted for its manufacturing in China but failed to properly supervise quality control, toys were sold in the United States containing harmful lead. The product cost aspects of this mistake were easily rectified. However, the reputation to the company, while less tangible, is likely to affect profits at an unknown level and for an unknown period of time. So the analysis of risk involves both tangible and intangible considerations, making it difficult to know how much risk is really involved in creating x profits as the result of y decisions. What this means for you is that any communication is going to be based on an evaluation of profit and loss, many forms of risk, and the time required for return on investment, just to name a few considerations. How do you communicate the relevant facts to management? How do you reduce the research to well-supported recommendations or to caution statements? These are only a few of the issues you face in managing information and in massaging it to create an effective, simple, and honest method of communication. </body></html>

The Manager's Pocket Calculator: A Quick Guide to Essential Business Formulas and Ratios

9780814416358

eBook

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Summary

Author Biography

Table of Contents

Excerpts