Key Management Ratios

Achieve financial excellence in your organization

Business ratios are guiding stars in the management of your organization; they provide your targets and standards. They will direct you towards the most beneficial long-term strategies, as well as towards effective short-term decision making.

Key Management Ratios enables managers of different functions to work together towards achieving business goals. It links the return on financial resources into the day to day operating parameters of the business. Skills which any manager from any background can implement.

Using visual supports, Key Management Ratios is easily absorbed and interpreted, and areas covered include:

• the foundations
• measuring and operating performance
• the cash flow cycle
• financial strength
• corporate valuation
• financial leverage
• investment ratios

• Part I: Foundations
1. Background
• Why do you need this book?
• The form and logic
• Method
• The philosophy
• Excitement
• Data that makes sense
2. Financial statements
• Introduction
• The balance sheet
• Balance sheet structure — fixed assets
• Balance sheet structure — liabilities
• Summary
3. Balance sheet terms
• Introduction
• The term used
4. Profit and loss account
• Introduction
• Working data
• Part II: Operating Peformance
5. Measures of performance
• Relationships between the balance sheet anmd the profit and loss account
• The ratiosn "return on total assets" and "return on equity"
• Balance sheet layouts
6. Operating performance
• Return on investment (ROI)
• Return on equity (ROE)
• Return on total assets (ROTA)
• Standards and operating performance
7. Performance drivers
• Operating performance
• Operating profit model
• Part III: Corporate Liquidity
8. Cash flow cycle
• Corporate liquidity
• The cash cycle
• Measures of liquidity — long and short analysis
9. Liquidity
• Sort-term liquidity measures
• Current ratio
• Quick ratio
• Working capital to sales ratio
• Working capital days
10. Financial strength
• Intrerest cover
• "Debt to equity" ratio (D/E)
• Leverage
• Summary
11. Cash flow
• The cash flow statement
• Sources and uses of funds — method
• Opening and cloning cash reconciliation
• Long and short analysis
• Financial reporting standards
• Part IV: Determinants of Corporate Value
12. Corporate valuation
• Introduction
• Share values
13. Financial leverage and corporate valuation
• Introduction
• Financial leverage
• V chart
• Market to book ratio
14. Growth
• Growth
• Analysis
• Growth equilibrium
• Application to acquisitions
• Part V: Management Decision-Making
15. Cost, volume and price relationships
• Introduction
• Costing illustration
• Contribution
• Break-even (B/E)
• Contribution to sales percentage (CPS)
• Summary
16. Investment ratios
• Introduction
• Product appraisal — the problem
• Product appraisal — steps to solution (1)
• Product appraisal — steps to solution (2)
• Product appraisal — present value (PV)
• Product appraisal — internal rate of return (IRR)
• Product appraisal — summary
17. Shareholder value added (SVA)
• Introduction
• Description
• Approach to valuation (1)
• Approach to valuation (2)
• Value for the equity shareholders
• Discount factor
• Terminal (continuing) value
• Complete model
• Appendix 1: Special Items
• Appendix 2: Companies used in the sample
• Appendix 3: Full set of ratio charts from sample companies
• Appendix 4: Discounting and compounding tables

Priceless when you study finance.