Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean

– By Karen Berman and Joe Knight with John Case

Some marketers are very good in understanding the financial side of business; equally, there are many who have a cursory knowledge of finance and financial terms but are totally blank on how to use these to help them make their role in a company that much more effective and meaningful.

There is no dearth of books on finance and one can pick up any that one likes. However, one book that I would like to recommend, especially to the non-finance types, is Financial Intelligence. The primary reason for that is that the book is extremely well written, jargon-free and extremely enjoyable to read (and that is a HUGE plus in its favour).

According to the authors – Karen Berman, Joe Knight and John Case – financial intelligence boils down to four distinct skill sets:

  • Understanding the foundation – the income statement (P&L account), the balance sheet, the cash flow statement, the difference between profit and cash.
  • Understanding the art (and science of finance and accounting).
  • Understanding analysis – ratios, return on investment to help make better decisions.
  • Understanding the big picture – the numbers don’t always tell the whole story and need to be understood in context.

An important goal of the book is to help people to take action based on their increasing comfort with finance by:

  • Speaking the language; after all, finance is the language of business.
  • Asking questions by looking at the income statement, the balance sheet and other reports with a critical, questioning eye.
  • Using the information in their jobs; because by using the information from various financial reports, managers can take more considered decisions towards improving the performances of their departments and their companies.

The eight sections of the book basically cover all the key topics related to finance including the art of finance and why it matters; the peculiarities of the income statement; the balance sheet; the criticality of cash; the importance of ratios; return on investment and how to calculate it; working capital management; and creating a financially savvy organisation.

The book uses some interesting illustrative stories throughout.

An important feature of Financial Intelligence is outlining the fact that finance managers rely on estimates, assumptions, and judgment calls, which can skew the numbers in one direction or another. This book helps you recognize and understand those biases, challenge or correct for them when necessary, and use this information to be a better manager.

A thorough reading of the book will make any non-finance manager that much more confident of financial numbers and, hopefully, that much more effective.

Rating: A+

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This article was written by Joy

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