Accounting and Finance for the NonFinancial Executive: An Integrated Resource Management Guide for the 21st Century

by Shim; Jae K.

Edition: 1st

ISBN13: 9781574442878

ISBN10: 1574442872

Format: Hardcover

Pub. Date: 2000-06-22

Publisher(s): CRC Press

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Summary

Have you recently been promoted? Are you starting a new business? Do you suddenly find that you need to know more about finances than you ever expected, but have no time for formal training? If so, you need Accounting and Finance for the Non-Financial Executive. Whether you are a newly promoted middle manager or executive, a marketing manager of a small company, an entrepreneur, or own your own business, your results will be measured in dollars and cents. You need to know the basics of finance and accounting to make sound business decisions and become successful. Shim shows you the strategies for evaluating investment decisions such as return on investment analysis. You will see what you need to know, what to ask, which tools are important, what to look for, what to do, and how to do it. Easy to read and useful, the book presents many practical examples, illustrations, guidelines, measures, rules of thumb, graphs, diagrams, and tables that make comprehending the subject easy. Accounting and Finance for the Non-Financial Executive prepares you for additional managerial responsibilities. You will be better equipped to prepare, appraise, evaluate, and approve plans to accomplish departmental objectives. You will be able to back up your recommendations with carefully prepared financial support. Whether they are based on marketing, production, or personnel, by learning how to think in terms of finance and accounting you can intelligently express your ideas.

Author Biography

Jae K. Shim is Professor of Accountancy and Finance at California State University, Long Beach.

Part I Thinking Finance

Financial Decision Making and Analysis

(12)

The Nonfinancial Manager's Concern with Finance

(2)

What Are the Scope and Role of Finance?

(1)

The Importance of Finance

(5)

The What and Why of Finance

(1)

What Are Financial Managers Supposed to Do?

(1)

What Is the Relationship Between Accounting and Finance?

(4)

Financial and Operating Environment

(4)

What Should You Know About Financial Institutions and Markets?

(1)

Financial Assets vs. Real Assets

(1)

Basic Forms of Business Organizations

(1)

Sole Proprietorship

(1)

Partnership

(1)

Corporation

(2)

Conclusion

(1)

What Can You Do About Your Departmental Costs?

(8)

Importance of Cost Data

(1)

Types of Costs

(2)

Costs by Function

(1)

Costs by Ease of Traceability

(1)

Costs by Timing of Charges Against Revenue

(1)

Costs by Behavior

(1)

Costs by Averaging

(1)

Costs by Controllability

(1)

Other Important Cost Concepts Useful for Planning, Control, and Decision Making

(1)

How Do Your Costs Behave?

(2)

Costs by Behavior

(2)

Segregating Fixed Cost and Variable Cost

(1)

Cost Allocation

(1)

Cost Analysis

(1)

What You Can Learn from the Japanese

(1)

Conclusion

(2)

How You Can Use Contribution Margin Analysis

(6)

Should You Accept a Special Order?

(1)

How Do You Determine a Bid Price?

(1)

Determining Profit from Year to Year

(2)

Are You Utilizing Capacity?

(1)

Conclusion

(1)

Are You Breaking Even?

(10)

What Is Cost-Volume-Profit (CVP) Analysis?

(1)

What and Why of Break-Even Sales

(4)

What Is Margin of Safety?

(1)

Cash Break-Even Point

(1)

What Is Operating Leverage?

(2)

Sales Mix Analysis

(1)

Conclusion

(2)

How to Make Short-Term, Nonroutine Decisions

(10)

What Costs Are Relevant to You?

(1)

Accepting or Rejecting a Special Order

(1)

Pricing Standard Products

(2)

Analyzing the Make-or-Buy Decision

(1)

Determining Whether to Sell or Process Further

(1)

Adding or Dropping a Product Line

(1)

Utilizing Scarce Resources

(1)

Do Not Forget the Qualitative Factors

(1)

Conclusion

(2)

Financial Forecasting and Budgeting

(18)

What Is a Forecast?

(1)

How Can You Use Forecasts?

(1)

How Do You Prepare a Financial Forecast?

(1)

Percent-of-Sales Method of Financial Forecasting

(2)

What Is a Budget?

(3)

What Assumptions Must Be Made?

(1)

What Is the Structure of the Budget?

(10)

The Sales Budget

(1)

The Production Budget

(1)

The Direct Material Budget

(1)

The Direct Labor Budget

(1)

The Factory Overhead Budget

(1)

The Ending Inventory

(1)

The Selling and Administrative Expense Budget

(1)

The Case Budget

(2)

The Budgeted Income Statement

(1)

The Budgeted Balance Sheet

(1)

Is There a Shortcut Approach to Formulating the Budget?

(1)

Can You Use an Electronic Spreadsheet to Develop a Budget Plan?

(1)

Computer-Based Models for Financial Planning and Budgeting

(1)

Conclusion

(1)

Using Variance Analysis as a Financial Tool

(18)

Defining a Standard

(1)

The Usefulness of Variance Analysis

(1)

Setting Standards

(1)

Determining and Evaluating Sales Variances

(1)

Cost Variances

(1)

Materials Variances

(2)

Labor Variances

(1)

Overhead Variances

(2)

The Use of Flexible Budgets in Performance Reports

(2)

Standards and Variances in Marketing

(2)

Sales Standards

(1)

Analyzing Salesperson Variances

(1)

Variances in Warehousing Costs

(1)

Conclusion

(4)

Part II Critical Asset Management Issues

Working Capital and Cash Management

(12)

Working Capital

(1)

Financing Assets

(1)

Managing Cash Properly

(2)

Getting Money Faster

(4)

Delaying Cash Payments

(2)

Opportunity Cost of Foregoing a Cash Discount

(1)

Volume Discounts

(1)

Conclusion

(2)

How to Manage Your Accounts Receivable

(8)

Credit References

(1)

Credit Policy

(1)

Analyzing Accounts Receivable

(4)

Conclusion

103

(2)

How to Manage Inventory

105

(12)

Inventory Management Considerations

105

(2)

Inventory Analysis

107

(1)

Determining the Carrying and Ordering Costs

108

(1)

The Economic Order Quantity (EOQ)

109

(1)

Avoiding Stockouts

110

(1)

Determining the Reorder Point or Economic Order Point (EOP)

111

(1)

The ABC Inventory Control Method

112

(2)

Conclusion

114

(3)

Part III Financial Decision Making for Managers

Understanding the Concept of Time Value

117

(18)

Future Values --- How Money Grows

117

(1)

Intrayear Compounding

118

(1)

Future Value of an Annuity

119

(1)

Present Value --- How Much Is Money Worth Now?

120

(1)

Present Value of Mixed Streams of Cash Flows

121

(1)

Present Value of an Annuity

122

(1)

Perpetuities

122

(1)

Applications of Future Values and Present Values

123

(1)

Deposits to Accumulate a Future Sum (or Sinking Fund)

123

(1)

Amortized Loans

124

(1)

Annual Percentage Rate (APR)

125

(1)

Rates of Growth

126

(1)

Compound Annual Rate of Interest

126

(1)

Bond Values

127

(1)

Use of Financial Calculators and Spreadsheet Programs

128

(1)

Conclusion

128

(7)

Capital Investment Decisions

135

(16)

What Are the Types of Investment Projects?

135

(1)

What Are the Features of Investment Projects?

136

(1)

How Do You Measure Investment Worth?

136

(4)

Payback Period

136

(1)

Accounting Rate of Return (ARR)

137

(1)

Net Present Value (NPV)

138

(1)

Internal Rate of Return (IRR)

139

(1)

Profitability Index

140

(1)

How to Select the Best Mix of Projects with a Limited Budget

140

(1)

How Do Income Taxes Affect Investment Decisions?

141

(2)

Types of Depreciation Methods

143

(2)

Straight-Line Method

143

(1)

Sum-of-the-Years'-Digits (SYD) Method

143

(1)

Double-Declining-Balance (DDB) Method

144

(1)

How does MACRS Affect Investment Decisions?

145

(2)

What to Know About the Cost of Capital

147

(3)

Cost of Debt and Preferred Stock

148

(1)

Cost of Common Stock

148

(1)

Cost of Retained Earnings

149

(1)

Measuring the Overall Cost of Capital

149

(1)

Conclusion

150

(1)

How to Analyze and Improve Management Performance

151

(10)

What is Return on Investment (ROI)?

151

(1)

What Does ROI Consist of? --- Du Pont Formula

152

(1)

ROI and Profit Objective

153

(1)

ROI and Profit Planning

154

(2)

ROI and Return on Equity (ROE)

156

(3)

A Word of Caution

159

(1)

Conclusion

160

(1)

How to Evaluate Your Segment's Performance

161

(18)

Appraising Manager Performance

161

(1)

Responsibility Center

162

(15)

Revenue Center

162

(3)

Cost Center

165

(1)

Profit Center

166

(3)

Transfer Pricing

169

(4)

Investment Center

173

(1)

Return on Investment (ROI)

173

(2)

Residual Income (RI)

175

(1)

Decisions Under ROI and RI

176

(1)

Conclusion

177

(2)

How Taxes Affect Business Decisions

179

(10)

Tax Strategies and Planning

179

(1)

Tax Computation

180

(5)

Interest and Dividend Income

181

(1)

Interest and Dividends Paid

182

(1)

Operating Loss Carryback and Carryforward

182

(1)

Capital Gains and Losses

183

(1)

Modified Accelerated Cost Recovery System (MACRS).

184

(1)

Alternative ``Pass Through'' Tax Entities

184

(1)

S Corporations

185

(1)

Limited Liability Companies

185

(1)

Foreign Tax Credit

185

(1)

Conclusion

185

(4)

Part IV Obtaining Funds

What to Know About Short-Term Financing

189

(16)

How to Use Trade Credit

189

(1)

Cash Discounts

190

(1)

When Are Bank Loans Advisable?

190

(6)

Are You Eligible for an Unsecured Loan?

192

(1)

What Will You Give to Obtain a Secured Loan?

192

(1)

What Line of Credit Can You Get?

192

(1)

What Is an Installment Loan?

193

(1)

How Do You Compute Interest?

194

(2)

What Should You Know When Dealing With a Banker?

196

(1)

What Are Banker's Acceptances?

196

(1)

Are You Forced to Take Out a Commercial Finance Company Loan?

197

(1)

Are You Financially Strong Enough to Be Able to Issue Commercial Paper?

197

(1)

Should Receivables Be Used for Financing?

197

(2)

Should Inventories Be Used for Financing?

199

(2)

What Other Assets May Be Used for Financing?

201

(1)

Conclusion

201

(4)

Looking at Term Loans and Leasing

205

(6)

Intermediate-Term Bank Loans

205

(2)

Using Revolving Credit

207

(1)

Insurance Company Term Loans

207

(1)

Financing with Equipment

207

(1)

Leasing

207

(3)

Lease-Purchase Decision

210

(1)

Conclusion

210

(1)

Deciding on Long-Term Financing

211

(32)

Investment Banking

211

(1)

Publicly and Privately Placed Securities

212

(1)

Going Public --- About an Initial Public Offering (IPO)

213

(7)

How Does Going Public Work?

214

(1)

The Pros of Going Public

214

(1)

The Cons of Going Public

215

(2)

How to Avoid the Drawbacks of Going Public

217

(1)

What Is the Process of Going Public?

218

(1)

Alternatives to Going Public

219

(1)

Venture Capital Funding

220

(2)

Types of Long-Term Debt and Their Usefulness

222

(6)

Mortgages

222

(1)

Bonds

222

(1)

Computing Interest

222

(1)

Types of Bonds

223

(1)

Bond Ratings

224

(1)

The Advantages and Disadvantages of Debt Financing

225

(2)

Bond Refunding

227

(1)

Equity Securities

228

(7)

Preferred Stock

228

(2)

Common Stock Features

230

(4)

Stock Rights

234

(1)

How Should You Finance?

235

(5)

Working a Loan Online

238

(1)

Raising Equity and Venture Capital Online

239

(1)

Conclusion

240

(3)

Part V Dissecting Financial Statement Information

Understanding Financial Statements

243

(8)

The Income Statement and Balance Sheet

243

(4)

Revenue

243

(1)

Expenses

243

(1)

Net Income (Loss)

244

(1)

Assets

244

(1)

Liabilities

245

(1)

Equity

245

(2)

The Statement of Cash Flows

247

(3)

FASB Requirements

248

(1)

Accrual Basis of Accounting

248

(1)

Operating Activities

249

(1)

Investment Activities

249

(1)

Financing Activities

249

(1)

Conclusion

250

(1)

Recording Financial Information and Accounting Conventions

251

(10)

Double Entry and the Accounting Equation

251

(8)

The Accounting Equation

251

(5)

The Account

256

(1)

Ledger

256

(1)

A Chart of Accounts

256

(2)

The System of Debits and Credits

258

(1)

The ``How and Why'' of Debits and Credits

259

(1)

Journals

259

(1)

Conclusion

259

(2)

Analyzing Financial Statements

261

(18)

What and Why of Financial Statement Analysis

261

(1)

Horizontal and Vertical Analysis

262

(2)

Working with Financial Ratios

264

(11)

Liquidity

265

(1)

Asset Utilization

266

(3)

Solvency (Leverage and Debt Service)

269

(1)

Profitability

270

(1)

Market Value

271

(4)

An Overall Evaluation --- Summary of Financial Ratios

275

(3)

Conclusion

278

(1)

Index

279

Accounting and Finance for the NonFinancial Executive: An Integrated Resource Management Guide for the 21st Century

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