Financial analysis tools and techniques

Financial Analysis Tools and Techniques, a business-focused revision of Erich Helfert's perennial college bestseller Techniques of Financial Analysis, is a quick, easy read for nonfinancial managers and an excellent refresher and reference for finance professionals. This practical, hands-on guide provides a new introductory chapter that gives context to today's valuation turmoil and helps professionals understand the economic drivers of a business and the importance of cash flow.

The book's overriding theme is that any business should be viewed as a dynamic, integrated system of cash flows—one that can be activated and managed by investment decisions. Topics, discussed in clear, comprehensive, and easy-to-understand detail, include:

Increasing shareholder value through value-based management (VBM)

Interpreting pro forma financial statements

Proven Techniques for All Managers and Financial Professionals to Generate, Understand, and Act Upon Key Financial Information

The syntax and "code" of financial analysis, along with the avenues for arriving at appropriate and useful answers, have long seemed like a foreign language to nonfinancial managers. Financial Analysis Tools and Techniques simplifies the process, and provides busy managers and professionals with the guidelines they need for conducting effective analyses and making sound economic trade-offs and business decisions.

In a business systems context, this essential book explains how to:

• Interpret financial statements
• Develop financial projections
• Evaluate business investment decisions
• Assess the implications of financing choices
• Derive the value of a business or security
• Understand the role of analysis in creating shareholder value

Financial Genome by Modernsoft, Inc.

This advanced knowledge-based business analysis and planning software is fully integrated with this book, allowing users to:

• Access data from databases, spreadsheets, user input
• Develop free-form or structured analyses with consistency
• Produce a wide variety of customizable financial statements
• Create integrated financial pro-forma projections

Since the first of its ten editions appeared in 1963, Erich Helfert's seminal Techniques of Financial Analysis has provided business students as well as financial practitioners with a concise and practical overview of financial analysis tools and concepts. What sets this classic text apart then, and continues to distinguish it today, has been its focus on the continuous interrelationship between management decisions and the economic value of a business, explained in a unique systems context.

Financial Analysis: Tools and Techniques adapts this seminal reference to today's fast-changing professional market and establishes a new benchmark for direct, concise, and practical financial analysis information and interpretation. Specifically addressing key analytical needs in the tumultuous twenty-first-century business environment, it comments on valuable business applications of the tools and concepts with insights from Erich Helfert and his consulting clients.

Providing focused analyses of the economics of business investments and valuation, presenting discussions of cash-flow trade-offs and time-value analysis against the strategic backdrop of the business system, and emphasizing enhancement of shareholder value through value-based management (VBM), Financial Analysis: Tools and Techniques will help all nonfinancial managers to make sound investment, operating, and financing decisions. Concise yet sufficiently detailed, it covers the full range of financial analysis issues, including:

• Managing the business as a system
• Financial statements
• Funds cycles for manufacturing, sales, and service
• Cash management
• Ratio analysis and performance
• Pro-forma financial statements
• Financial modeling
• Leverage
• Financial growth plans
• Time value of money
• Analysis of investment decisions
• Using return standards
• Cost of capital
• Financing choices
• Definitions of value
• Shareholder value and value-based methodologies

Financial Analysis: Tools and Techniques is a quick and easy read for the nonfinancial manager and an excellent refresher and reference for the financial professional. In conjunction with its companion software Financial Genome, it represents the next step in financial analysis—one that gives financial analysis and economic decisions their proper importance and context in the successful operation of a business.

Table of Contents

Preface

Introduction

Ch. 1 The Challenge of Financial/Economic Decision-making 1
Ch. 2 A Systems Context for Financial Management 21
Ch. 3 Managing Operating Funds 59
Ch. 4 Assessment of Business Performance 95
Ch. 5 Projection of Financial Requirements 161
Ch. 6 Dynamics and Growth of the Business System 191
Ch. 7 Cash Flows and the Time Value of Money 223
Ch. 8 Analysis of Investment Decisions 255
Ch. 9 Cost of Capital and Business Decisions 297
Ch. 10 Analysis of Financing Choices 325
Ch. 11 Valuation and Business Performance 357
Ch. 12 Managing for Shareholder Value 391

App. I Financial Analysis Using Financial Genome 425
App. II Glossary of Key Terms and Concepts 433
App. III Financial Information and On-Line Sources 449
App. IV Basic Inflation Concepts 463
App. V Some Issues in Multinational Financial Analysis 469

Index 477