Finance Accounting

MEGA
FINANCE
COMPILATION

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THE KEY
DIFFERENCES
BETWEEN
FINANCE &
ACCOUNTING
Accounting Vs. Finance

How are they different?
Accounting
Approach: Historical & Current Financial

Information
Focus: Compliance
Direction: Backward
Verb: Report
Finance
Approach: Current & Future Cash Flows
Focus: Value creation through capital allocation
Direction: Forward
Verb: Plan
Accounting
Evolved through accounting principles:
1. to smooth out the results of economic

activity over time to match revenues and
expenses.
2. to be conservative in the recording and
reporting of the results of economic activity.
Finance
Evolved in response to accounting principles:
1. to transition from profits to cash through

EBITDA, operating cash flow, and free cash
flow.
2. to distribute and invest financial resources
with the goal of increasing efficiency and
maximizing profits.
Key Soft Skills in Accounting
1. Detail Oriented
2. Conservative thinking
3. Organized
4. Analytical
5. Efficient
6. Process driven
7. Business acumen
8. Communication
9. Problem solving
10. Critical thinking
Key Soft Skills in Finance
1. Research Oriented
2. Analytical
3. Risk-taking
4. Innovative thinking
5. Results driven
6. Business acumen
7. Collaboration
8. Communication
9. Problem solving
10. Negotiation
Specialized Technical
Knowledge in Accounting
1. Financial Accounting
2. Audit
3. Tax
4. Business Law
5. Management Accounting
Specialized Technical
Knowledge in Finance
1. Corporate Finance
2. Capital Budgeting
3. Capital Markets
4. Portfolio Management
5. Financial Modelling
Value in Accounting

Driven by the conservatism principle:
1. lower of projected asset values and

higher of estimated liability values
2. when value isn't known it's recorded as
$0 to ensure the business doesn't
overestimate assets and underestimate
liabilities.
Value in Finance

Driven by the valuation process:
1. future cash flows are projected over a

period of time.
2. a discount rate is applied to the stream
of cash flow values to bring their value
into the present.
3. the discount rate is reflective of
opportunity cost, inflation, and risk.
Accounting vs. Finance

How are they working together?
1. both invested in the profitability and

success of the company
2. reliable accounting data is critical for
financial planning
3. partnership with coordinated efforts
3 THINGS
YOU
DIDN'T KNOW
ABOUT
FINANCE
There are many ways to
describe what finance is and
what it does.

But here are 3 important

things finance is not.
1. Finance is not really
about money
It’s about information and

incentives.
Company shareholders
(Principals) hire
managers (Agents) to run
their companies and
make decisions that are in
their best interest as
owners.
However, Agents hold
most of the information,
and they can choose to
make decisions that
benefit them to the
detriment of the Principals.

The right incentives
structure can help align
the interests of the Agents
and the Principals, but this
is fundamentally the big
challenge of finance.

2. Finance is not rocket
science.
But it pays to present it

that way.
Money flows from savers
to users through layers
and layers of
intermediaries.

Information is
asymmetrically held and
shared across the
intermediaries.

Deliberately showcasing
finance as overly
complicated means
Agents with expertise
become necessary to help
Principals read the map
and navigate their boats.

3. Finance is not
accounting.
But most people think

they’re the same.
Accounting is backward-
looking, and many of the
accounting principles are
focused on smoothing out
performance, which also
obscures the inflows and
outflows of cash.
Finance is forward-
looking, and modern
finance responded to
accounting by
emphasizing cash and
cash flow metrics.
If you’re looking to learn
more:

Check out the work of

Professor Mihir Desai
The Harvard Mizuho
Financial Group Professor
of Finance.

4 STEPS TO
MANAGE
YOUR
CASH FLOW
1. UNDERSTAND
2. CALCULATE
3. OPTIMIZE
4. FINANCE
1. UNDERSTAND
YOUR CASH
INFLOW AND
OUTFLOW DRIVERS
3 Types of Cash
Inflows & Outflows

Operating Cash Inflows/Outflows

Investing Cash Inflows/Outflows

Financing Cash Inflows/Outflows
Operating Cash Inflows
Any cash coming into your company from
operating activities
Operating Cash Outflows

Any cash leaving your company as a result of
operating activities
Operating
Cash Flow Drivers
Account Receivable Days
(DSO)

the average number of days

necessary to receive cash from
credit sales
(receivables conversion period)

Account Receivable Days
(DSO)

= Average Accounts Receivable/

Revenues x 365

Days Inventory
Outstanding (DIO)

the average number of days required

to sell inventory
(inventory conversion period)

Days Inventory
Outstanding (DIO)

= Average Inventory/
Purchases x 365

Purchases = Ending Inventory -

Opening Inventory + COGS

simplified formulas use COGS instead of

Purchases in the denominator
Days Payable Outstanding
(DPO)

the average number of days

suppliers are willing to wait for a
cash payment
(payables conversion period)

Days Payable Outstanding
(DPO)

= Average Accounts Payable /

Purchases x 365

Purchases = Ending Inventory -

Opening Inventory + COGS

simplified formulas use COGS instead of

Purchases in the denominator
2. CALCULATE THE
CASH CONVERSION
CYCLE
The Cash Conversion Cycle

measures on average how long a

company’s cash is tied up in
net working capital assets

The Cash Conversion Cycle
(days)

➕Days Inventory Outstanding DIO

➕Days Sales Outstanding DSO
➖Days Payable Outstanding DPO

= Cash Conversion Cycle CCC
3. OPTIMIZE THE
CASH CONVERSION
CYCLE
Accelerate the collection
of Accounts Receivable

Offer discounts to customers for early

payment.
Charge penalities for overdue invoices.
Speed up invoicing after each sale.
Accelerate the sale of
Inventory

Analyze your product lines to clear out

slow selling inventory.
Optimize inventory management by

establishing and tracking specialized
KPIs.
Manage the payment of
Accounts Payable

Renegotiate payment terms with suppliers

as possible, without straining your
relationship.
Align customer and supplier payment terms
Arrange customer payments via

transferrable letters of credit and transferr
to your supplier.
4. FINANCE THE
CASH CONVERSION
CYCLE
Financing the Cash
Conversion Cycle

A positive Cash Conversion Cycle

number means business operations
are tying up cash, and covering
operating expenses will require
financing.
Sources of Financing

The Cash Conversion Cycle (CCC) can

be financed using internal capital
(retained earnings = equity) or
external capital (debt or equity).
Internal Financing

Because companies have limited

resources, using internal cash reserves
for the financing of the cash conversion
cycle reduces cash available for use in
other areas of the business.
ROI & External Financing

An ROI analysis will identify if the

business is better off allocating
internal resources elsewhere, and
leveraging external financing for the
cash conversion cycle instead.
Sample allocation of $1MM:
CHOICE BETWEEN
> 5% savings by avoiding borrowing costs
and financing CCC internally
OR
> 17% ROI from new internal automation
project
OPTIMIZED SOLUTION
> borrow externally at 5%, invest internally
at 17%, net benefit of 12%
Negotiating External
Debt Financing

External debt financing for the CCC can

typically be negotiated by leveraging
up to 90% of good Accounts Receivable
and up to 50% of Inventory balances
(borrowing base).
Negotiating External
Equity Financing

Equity financing for the CCC typically

comes from external sources when
the business is not profitable, or when
it has an excessive risk profile (high
growth, cash flow volatility, high
leverage).
THE COST OF
WORKING
CAPITAL
Working capital
A measure of short-term liquidity
Calculated as current assets less current

liabilities
Source of short-term operating cash flows
Helps determine if there are sufficient

current assets available to pay off current
liabilities
Working capital
Q: What is the key business objective for

working capital?
A: To optimize it by finding the right balance

of customer trade terms to be competitive;
stocking only as much inventory as as
necessary to fulfil orders per customer
agreements; and delaying payables as long as
possible without straining vendor
relationships.
Working capital
Q: Why is optimizing working capital

important?
A: Because of the significant costs associated

with the management of working capital, and
the resulting financing requirements which
will either reduce cash balances available for
other projects, or will require external
financing increasing the overall cost of capital.
The Cost of Working Capital
1. Costs of extending credit to customers
2. Costs of carrying inventory
3. Costs of foregoing early payment discounts

from suppliers
The costs of customer credit
People costs - processing and collecting

Financing costs – financing receivables
Bad debt costs – customer delinquency
How to manage?
Timely invoicing
Credit controls
Discounts for early payments
How to measure?
Days Sales Outstanding (DSO)
= Average Accounts Receivable/Revenues x 365
The costs of carrying inventory
Storage & Handling (order, receive, ship)

Obsolescence & Spoilage costs
Theft & Insurance costs
Financing costs
How to manage?
Economic Order Quantity to optimize
Just-In-Time Inventory Mngmt to minimize
How to measure?
Days Inventory Outstanding (DIO)
= Average Inventory/Purchases x 365
The costs of foregoing early
payment discounts
Supplier discounts for early payment could be

cheaper than typical borrowing costs
“2/10, net 30” => 2% when paid in 10 days
How to manage?
Negotiate extended credit terms
Take advantage of early payment discounts
How to measure?
365 days/20 days = 18.25 periods per year
2% x 18.25 periods per year = 36.5% per year
CONTRIBUTION
MARGIN IS NOT
GROSS
MARGIN
Gross Margin vs. Gross Profit
vs. Contribution Margin
Gross profit is a measure of absolute value calculated in
currency units ($).
Gross Profit = Revenue - COGS
Gross (profit) margin is a ratio calculated in

percentages (%).
Gross Margin = (Revenue - COGS)/Revenue
Contribution margin is (despite name suggesting a ratio)

another measure of absolute value (currency units $)
Contribution Margin = (Price /unit- Variable Cost / unit)
Gross Margin
The gross margin (GM) is the sales price of a product
or service, less all direct costs of the product or
service expressed as a percentage of sales.
It represents each dollar of revenue that the

company retains after paying for COGS.
It is used to understand the percentage of revenue

generated to cover the operating expenses of the
business.
Contribution Margin
The Contribution Margin (CM) is the sales price of a

product or service, less all its variable costs.
It represents the incremental profit per unit earned on

the sale after covering variable costs (direct
materials, direct labor, and variable overhead).
It is used to understand the dollar value of revenue

required to cover all fixed costs and drive either a
break even, or a certain dollar value of profit in the
business.
Contribution Margin Example
A product that sells for $100 and has variable

costs of $75 would have a Contribution Margin of
$25
Sales price per unit of $100 – Variable cost per

unit of $75 = Contribution Margin per unit of $25
Contribution Margin Ratio
The Contribution Margin Ratio (CM Ratio) is the

Contribution Margin (CM) converted to a
percentage by dividing the CM dollar value by
the sales value.
Contribution Margin Ratio = (Sales Price per unit

- Variable Cost per unit) / Sales Price per unit
Contribution Margin Ratio Example
A company with fixed costs of $500, which sells a

product with variable costs of $75 for $100, will
break even after selling 20 units or $2,000 of
revenue.
Sales price per unit of $100 – Variable cost per

unit of $75 = Contribution Margin per unit of $25
and Contribution Margin Ratio of 25% ($25 /
$100)
Break-Even
The break-even point is the point where revenues

equal costs.
It can be calculated in terms of units of sales or dollars

of sales, and it is used to determine the level of sales
needed to cover all costs, both fixed and variable, and
start earning a profit.
Break-even (units) = Fixed cost / CM per unit Break-

even (dollars) = Fixed cost / CM ratio
Break-Even Example
A company with fixed costs of $500, which sells a

product with variable costs of $75 for $100, will break
even after selling 20 units or $2,000 of revenue.
Sales price per unit of $100 – Variable cost per unit of

$75 = Contribution Margin per unit of $25 and
Contribution Margin Ratio of 25% ($25 / $100)
Fixed costs of $500 / CM per unit of $25 = 20 units
Fixed costs of $500 / CM Ratio of 25% = $2,000 sales
Break-Even + Profit Example
Once a company breaks even, it starts earning a profit.
To calculate, add the desired profit value to the fixed

costs in the break-even formula.
Assuming desired profit is $100:
Fixed costs of $500 + Profit of $100 / CM per unit of $25

= 24 units
Fixed costs of $500 + Profit of $100/ CM Ratio of 25% =

$2,400 sales
Operating Leverage
1. In periods of steady and profitable growth,
adding fixed costs will increase operating
leverage, which will also increase the number of
units that must be sold and the revenue that
needs to be realized in order to break even.
2. In periods of revenue volatility, converting some
fixed costs to variable costs (e.g. salaries to
commissions) will reduce operating leverage,
which will also reduce the number of units that
must be sold and the revenue that needs to be
realized in order to break even.
Financial vs. Management
Reporting
Income statements traditionally present information
based on accounting standards, which reduces their
usefulness for management decision-making.
A more useful reporting format presents expenses

based on their behaviors, splitting the traditional
income statement between variable and fixed costs.
While the contribution margin format is not acceptable

for external reporting, it is an internal goldmine for
management planning and analysis purposes.
Traditional vs. Contribution
Margin Format
4 STEPS TO
ASSESS
BUSINESS
FINANCIAL
HEALTH
Who benefits from analyzing
business financial health?

Owners / Entrepreneurs
Managers
Employees
Investors
How Owners Benefit

making more informed decisions

allocating resources effectively
preparing for financing
negotiations
understanding their leverage in
negotiations

How Managers Benefit

directing the team effectively

understanding the business
investment criteria
aligning individual and
organizational goals
strategically prioritizing for
maximum impact
How Employees Benefit


priorities and performance
drivers
aligning personal and
organizational goals
deciding when to increase
committment and when to seek
other opportunities
How Investors Benefit


fundamentals
understanding how aggressive
management decisions are
understanding drivers and
sustainability of cash flow
determining whether investment
aligns with their objectives
Business Financial Health
in 4 steps
1. Balance Sheet Analysis
2. Income Statement Analysis
3. Cash Flow Statement Analysis
4. Ratio Analysis
1. Balance Sheet Analysis
Objectives: evaluate liquidity,

solvency and asset values to
determine the business ability
to generate cash flow
What to focus on:

-Proportion of debt relative to equity

-Short term business liquidity
-Percentage and make up of tangible
vs. intangible assets
-Average time to collect payment from
customers and pay suppliers
-Concentration of customers/suppliers
-Average time to sell inventory
-Asset values in the ordinary course of
business
2. Income Statement Analysis
Objective: evaluate operating

performance to determine the
business ability to generate
cash flow
What to focus on:

-Revenue growth over time

-Gross profit margin
-Net profit and net profit margin
-Proportion of fixed vs. variable costs
-The ability of the business to cover
mandatory interest payments on debt
-The proportion of capital distributions
vs. capital reinvestment in the
business
3. Cash Flow Statement
Analysis
Objective: evaluate sources

and uses of cash to assess the
business ability to generate
cash flow
What to focus on:

-The company's liquidity position

-The company ’s sources and uses of
cash
-The free cash flow generated by the
company and available to be
reinvested in business assets or
operations
-The overall changes in the cash
position of the company
4. Ratio Analysis
Objective: use in conjunction

with trend analysis to
understand business
performance, liquidity, solvency,
efficiency and cash flow
generation ability
Ratio Analysis Basics

Identify the ratios that fit your

business objectives, both internal and
external
Tailor financial analysis to the

business and its individual situational
factors (industry, geography, size, etc)
Track ratios over time to identify

trends and inform strategic planning
Gross profit margin: The percentage of
profit generated after the direct cost
of sales were deducted from revenue
Net profit margin: The percentage of

profit generated after all expenses
have been deducted from revenue,
including interest and tax.
Interest Coverage ratio: The
company’s ability to cover borrowing
costs on financial obligations
Debt Service/Fixed Charge Coverage

ratio: The company’s ability to service
the full principal and interest cost
associated with its financial
obligations
Current ratio: The company’s ability to
meet short-term obligations over the
next 12 months
Quick ratio: The company’s ability to

meet short-term obligations over the
next 12 months using only highly liquid
assets (i.e. excluding inventory)
Debt-to-EBITDA ratio: The proportion

of annual cash flows versus the total
funded/financed debt (subject to
principal and/or interest)
Debt-to-equity ratio: The proportion of
debt versus equity used by the
company to finance its assets and
operations
Return on equity (ROE): The

company’s ability to use its equity
resources to earn profits
Return on assets (ROA): The

company’s ability to use its assets to
earn profits
Inventory turnover: The number of
times per period that the entire
inventory was sold (the inverse of DIO)
Receivables turnover: How many times

per period the company has collected
its accounts receivable (the inverse of
DSO)
Payables turnover: How many times per

period the company has paid its
accounts payable (the inverse of DPO)
HOW TO
PREPARE
A CASH
BUDGET
Direct vs. Indirect
A cash budget can be prepared using either the

direct method or the indirect method.

A cash forecast will be the similar to a budget but

instead of showing the company's plan, it will
show the company's actual expectations for
results for the period.
Direct Method
Compiles the cash inflows and outflows to arrive

at the net change in cash.
Tracks directly how cash is received and spent
Inflows:
✅cash from customers
Outflows:
✅cash paid to vendors
✅cash paid to employees
✅cash paid for taxes
✅cash paid for interest
Indirect Method
Starts with net income & adjusts:

✅items that do not require a cash outlay
(depreciation and amortization, share-based
compensation, gains or losses from the sale of fixed
assets or investments)
✅non-operating items considered elsewhere
(dividend payments received)
✅changes in current assets and current liabilities
(receivables, payables, inventories, prepaids,
accruals)
Income statement Vs. Cash budget.
Sales revenue Cash from sales
Cost of goods sold Product costs paid
General and General and

administrative administrative costs
expenses paid
Income tax expense Income tax paid
Capital Asset Transactions
Gain/loss on Cash paid and

disposal of capital received for capital
assets assets
Financing Transactions
Cash paid and

Investment earnings received for
investments
Cash paid and

Gain/loss on sale of
received for
investments
investments
Remember to Link:
✅the calculated net cash flows and
✅ the budgeted beginning cash balance with
✅the budgeted ending cash balance and
✅the ending cash balance on the budgeted

balance sheet
Remember to Communicate:
✅that the cash budget/forecast is based on

expectations that may or may not be realized
✅ that there are key underlying assumptions for the

cash flow budget/forecast and what they are
✅that there are factors that may be particularly

uncertain, and what their effect is expected to be
on the cash budget/forecast based on a sensitivity
analysis
Cash Flow Statement Comparison - Direct Vs. Indirect
Cash Flow from Operations Cash Flow from Operations
Cash Flow from Investing Cash Flow from Investing

Cash Flow from Financing Cash Flow from Financing
Total Cash Flow Total Cash Flow
Follow Oana Labes for more finance insights

EBITDA
IS
NOT
CASH
FLOW
Earnings before Interest, Taxes,
Depreciation and Amortization
is calculated just as the name
implies:

+ Net profit before tax

+ Interest expense
+ Depreciation expense
+ Amortization expense
3 Benefits of EBITDA:
1. It is easy to calculate, and has

become universally used as the
language of cash flow.
2. It allows financial performance

comparisons across businesses.
3. It levels the analysis playing field

by removing the impact of the
company’s capital structure
(interest payments), operating
leverage (depreciation &
amortization), and related tax
implications (tax).
10 Flaws of EBITDA:
1. It implies that all net income

translates into cash the same
way, allowing companies to use
non-cash items to artificially
increase it.
10 Flaws of EBITDA:
2. It does not consider the amount

of required reinvestment,
especially for companies with
short-lived assets.
10 Flaws of EBITDA:
3. It does not account for working

capital changes caused by sales
growth or declining efficiency.
10 Flaws of EBITDA:
4. It implies that loan repayment

will be prioritized as part of cash
flow uses.
10 Flaws of EBITDA:
5. It doesn’t say anything about

the quality of earnings.
10 Flaws of EBITDA:
6. It is an inadequate stand-alone
measure for comparing
acquisition multiples.
10 Flaws of EBITDA:
7. It can be severely misleading

used as a single measure of cash
flow without consideration of other
factors.
10 Flaws of EBITDA:
8. It can be easily manipulated

through aggressive accounting
policies (revenue and expense
recognition, asset write-downs and
concomitant adjustments to
depreciation schedules, excessive
adjustments)
10 Flaws of EBITDA:
9. It is a poor measure of
profitability
10 Flaws of EBITDA:
10. It is not a GAAP metric so it’s not

formally defined and thus every
company defines and calculates it
however they like.
How to Use EBITDA - Externally
EBITDA is often the numerator for the

Debt Service Coverage ratio, which
divides EBITDA by the sum of the
interest expense and the current
portion of long-term debt
(EBITDA/Principal + Interest)
Tracking coverage ratios is

important to manage a company's
external financing relationships.
Whenever CAPEX or Distributions
become material, banks will
typically change the DSC covenant
to control for these cash outflows.
The coverage ratio typically used to

replace Debt Service Coverage Ratio
(DSC) to account for the known
flaws of EBITDA is Fixed Charge
Coverage Ratio (FCCR)
Fixed Charge Coverage Ratio (FCCR)
FCCR = (EBITDA - Cash Taxes -

Distributions - CAPEX) / (Principal +
Interest)
Note that working capital isn’t

usually adjusted for in the FCCR
formula due to the fact lenders
typically finance the working capital
assets, so they don't need to control
for these cash outflows reducing
EBITDA.
The strength of the underlying cash

flow can be better understood by
breaking down EBITDA into EBIT and
depreciation and amortization. The
greater the depreciation and
amortization in EBITDA, the weaker
the underlying cash flow.
When to Use EBITDA - Internally
Appropriate as a cash flow tracking

metric when a company has:
-few non-operating income sources
-very little sales growth
-constant cash flow drivers
-capital expenditures approx. equal
to annual depreciation expense
THE 3 SOFTSKILLS
THAT WILL
ACCELERATE YOUR
FINANCE &
ACCOUNTING
CAREER
The Financing Advisory Firm for Growing Businesses

1. COMMUNICATION

Understanding the
numbers has become
table stakes in finance
and accounting.


To stand out,
explain.
What do the numbers mean?

To become invaluable,
recommend.
How do we bring the numbers

where the organization needs
them to be?

2. EMPATHY

Many times the key to
achieving your
objectives is by listening
instead of speaking.


To make your audience
feel heard,
listen to them.
What's on their mind?

To earn your audience’s trust,
connect with them.
What are they thinking and

feeling?

3. SERVICE

We all work in the
service of something or
someone.


Your work may serve a
team, an organization, or
a mission.

Be genuinely approachable.
Contribute your skills

generously.
Act with integrity.
Care to help.

LEADERSHIP
STYLES
AND
FINANCIAL
PERFORMANCE
"The most effective
executives use a collection of
distinct leadership styles—
each in the right measure, at
just the right time"

(Daniel Goleman - Harvard Business Review)
Organizational Climate &
Financial Performance
The organizational climate through the

various management leadership styles
has a profound and direct impact on
financial results, and can account for up
to 30% of financial performance.
Organizational Climate &
Financial Performance
A leader's ability to master multiple

leadership styles and to switch among
them as necessary enables the best
organizational climate and optimizes
business performance.
6 Basic Leadership Styles
1. The Coercive Style
2. The Authoritative Style
3. The Affiliative Style
4. The Democratic Style
5. The Pacesetting Style
6. The Coaching Style
The Coercive Style
“Do what I say” approach
Inhibits flexibility and reduces employee

engagement
Can be very effective in a turnaround

situation
The Authoritative Style
“Come with me” approach
Gives people the freedom to choose their own

means of achieving objectives
Less effective when the leader is less

experienced than their team
The Affiliative Style
“People come first” attitude
Useful for building team harmony or increasing

morale
Rarely offers advice and focuses exclusively on

praise which can leave people feeling uncertain
and allow poor performance to go uncorrected
The Democratic Style
Focused on giving workers a voice in decisions
Builds organizational flexibility and

responsibility, and helps generate fresh ideas
Can become higly inefficient due to endless

meetings and can leave peple confused and
feeling leaderless
The Pacesetting Style
Focused on leading a high-performing team

through example
Has a very positive impact on employees who are

self-motivated and highly competent
Can leave other employees feeling overwhelmed

and resentful of the leader's high standards and
tendency to take over a situation.
The Coaching Style
Focused on personal development
Works really well with employees who are already

aware of their weaknesses and want to improve
Not driven by performance on work-related tasks

which can frustrate employees who aren't
focused on self-motivation and self-
improvement
Adapted from "Leadership That Gets Results" by
Daniel Goleman
Harvard Business Review • march–april 2000
EMOTIONAL
INTELLIGENCE
AND
FINANCIAL
PERFORMANCE
Research has shown that the most
successful leaders have strengths
in the following emotional
intelligence competencies:

1. self-awareness
2. self-regulation
3. motivation
4. empathy
5. social skill
Emotional Intelligence
The ability to manage ourselves and our

relationships effectively
Consists of four fundamental

capabilities: self-awareness, self-
management, social awareness, and
social skill
Self-Awareness
Emotional self-awareness: read and
understand your emotions as well as recognize
their impact on work performance,
relationships, and the like
Accurate self-assessment: a realistic

evaluation of your strengths and limitations
Self-confidence: a strong and positive sense of

self-worth
Self-Management part I
Self-control: keep disruptive emotions and

impulses under control
Trustworthiness: display honesty and integrity

on a consistent basis
Conscientiousness: manage yourself and

your responsibilities
Self-Management part II
Adaptability: adjust to changing situations

and overcome obstacles
Achievement orientation: develop and meet

an internal standard of excellence
Initiative: a readiness to seize opportunities
Social Awareness
Empathy: sense other people’s emotions,
understand their perspectives, and take an
active interest in their concerns.
Organizational awareness: understand the

organization, build decision making
capabilities, and navigate politics.
Service orientation: recognize and meet

customer needs
Social Skill part I
Visionary leadership: take charge and inspire
others with a compelling vision.
Influence: use a wide range of persuasive

tactics.
Developing others: develop the abilities of

others through coaching and feedback
Communication: listen and send clear,

convincing, and well-tuned messages.
Social Skill part II
Change catalyst: initiate new ideas and lead
people in a new direction
Conflict management: de-escalate

disagreements and orchestrate resolutions
Building bonds: cultivate and maintain a wide

range of relationships
Teamwork and collaboration: promote

cooperation and build teams
Adapted from "Leadership That Gets Results" by
Daniel Goleman
Harvard Business Review • March–April 2000

Free EQ tests are available below(click the title to

access the link)

How Emotionally Intelligent Are You?

OR
Global Leadership Foundation - Emotional Intelligence Test

10 TIPS FOR
EFFECTIVE
FINANCIAL
STORYTELLING

1. START WITH A CLEAR
PROBLEM DESCRIPTION.

2. DELIVER KEY
MESSAGES UPFRONT.

3. TAILOR YOUR
DELIVERY TO YOUR
AUDIENCE AND THEIR
INFORMATION NEEDS.

4. CRAFT YOUR
NARATIVE FROM YOUR
DATA, NOT THE OTHER
WAY AROUND.

5. PROVIDE CONTEXT
FOR THE DATA
PRESENTED.

6. EXPLAIN THE CAUSE
AND EFFECT BEHIND
THE NUMBERS.

7. FRAME YOUR
ANALYSIS AND
CONCLUSIONS.

8. USE ANALOGIES TO
EVOKE EMOTIONS.

9. CHOOSE THE MOST
IMPACTFUL KEY
METRICS.

10. USE THE RIGHT DATA
VISUALIZATIONS FOR
YOUR STORY.

Click on my picture and +Follow for more
insights on finance, cash flow, and business.
Please Comment, Like and Share .
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Finance Accounting

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MEGA

It's a privilege to know my content has

reached 3.5 million people over the course of

the past 90 days.

How are they different?

Approach: Historical & Current Financial

Approach: Current & Future Cash Flows

Focus: Value creation through capital allocation

1. to smooth out the results of economic

1. to transition from profits to cash through

Driven by the conservatism principle:

1. lower of projected asset values and

Driven by the valuation process:

1. future cash flows are projected over a

How are they working together?

1. both invested in the profitability and

But here are 3 important

It’s about information and

But it pays to present it

But most people think

Check out the work of

Operating Cash Inflows/Outflows

Investing Cash Inflows/Outflows

Financing Cash Inflows/Outflows

Operating Cash Outflows

the average number of days

= Average Accounts Receivable/

the average number of days required

Purchases = Ending Inventory -

simplified formulas use COGS instead of

the average number of days

= Average Accounts Payable /

Purchases = Ending Inventory -

simplified formulas use COGS instead of

measures on average how long a

➕Days Inventory Outstanding DIO

= Cash Conversion Cycle CCC

Offer discounts to customers for early

Charge penalities for overdue invoices.

Speed up invoicing after each sale.

Analyze your product lines to clear out

Optimize inventory management by

Renegotiate payment terms with suppliers

Align customer and supplier payment terms

Arrange customer payments via

A positive Cash Conversion Cycle

The Cash Conversion Cycle (CCC) can

Because companies have limited

An ROI analysis will identify if the

External debt financing for the CCC can

Equity financing for the CCC typically

A measure of short-term liquidity

Calculated as current assets less current

Source of short-term operating cash flows

Helps determine if there are sufficient

Q: What is the key business objective for

A: To optimize it by finding the right balance

Q: Why is optimizing working capital