Finance for Non-Finance Managers

Question 1

Numbers person

Answer 1

person who works with numbers and love them

Question 2

Numbers are important

Answer 2

tools for measuring performance and productivity.

As well as numbers help us in decision-making.

Question 3

Broad finance definition answer

Answer 3

What things do I need?

How do I get the money to buy those things?

How do I manage those things efficiently once I have them?

Question 4

four types of accounting

Answer 4

1- Bookkeeping

2- Financial Accounting

3- Managerial Accounting

4- Income Taxes

Question 5

bookkeeping

Answer 5

bookkeeping is the systematic gathering of financial information.

Question 6

Financial accounting is

Answer 6

reporting summary financial information to people outside the organization.

Question 7

Managerial accounting

Answer 7

reporting confidential financial information to people inside the organization.

Question 8

Income taxes

Answer 8

making sure that you are in compliance with the tax laws.

Question 9

Financial statements

Answer 9

A method in which the effects of lots of transactions are summarized and reported in a manner that is used to users of financial statements who are standing outside the company.

Question 10

financial statements types

Answer 10

1- Balance sheet

2- Income statement

3- Cash flows

Question 11

Assets

Answer 11

are valuable resources that will provide benefits for the company in the future.

e.g. - cash, accounts receivable, Inventories. Property, Plant, equipment, net and long-term marketable securities.

Question 12

Liabilities

Answer 12

are the obligations to repay money or to provide services in the future.

In fact, they are one possible source for acquiring assets.

E.g. Advanced Ticket Sales of US Airlines account payable, long-term debt, another source of Liabilities is Owners’ Equity.

Question 13

Owner’s’ equity

Answer 13

The money provided to the company by the owners.

Question 14

How many ways owners could invest in the company?

Answer 14

Paid-in Capital

Retained Earnings

Question 15

Paid-in capital

Answer 15

It’s about company owners where they will take money from their own pockets and put into the company account.

Question 16

Retained earnings

Answer 16

The owner will leave the profits that are the net income of the company in the business, that is reinvested to generate more assets.

Question 17

Balance sheet

Answer 17

assets vs liabilities & owners’ equity

Question 18

Revenue

Answer 18

amount of assets generated in doing business.

Question 19

Expenses

Answer 19

amount of assets consumed in doing business.

Question 20

Net Income

Answer 20

The net amount of assets generated by a business through its business operations.

Question 21

Net income calculation

Answer 21

revenues - expenses = net income

Question 22

Cash flow statement activities

Answer 22

operating activities

investing activities

financing activities

Question 23

Operating activities

Answer 23

The daily activities of a business.

Here we hope that the company collects more cash than it spends on a daily basis.

Question 24

Investing activities

Answer 24

The activities that invest in the productive capacity of the business.

e.g. buying machines, buying land, buying buildings, those are investing activities. these activities don’t happen on a daily or monthly basis instead it happens occasionally.

Question 25

Financing activities

Answer 25

Borrowing money, repaying those loans, getting cash from investors, paying dividends to investors.

getting the capital or financing to buy the assets that a business needs.

Question 26

Financial ratio analysis

Answer 26

The examination of relationships, among financial statement numbers.

Question 27

Return on sales

Answer 27

Net Income / Sales = ROS

Question 28

Winston Churchill said:

Answer 28

The further backward you look, the further forward you can see.

Question 29

Return on equity

Answer 29

A general overall measure of how well a firm is doing.

Question 30

How to know the Return on equity ROE?

Answer 30

Net Income / Equity = ROE

Question 31

Return on equity tool

Answer 31

DuPont framework

Question 32

What is the lifeblood of the business?

Answer 32

The Cash - here is why…

Without cash, I will not be in business for very long. in other word, If I don’t turn cash into more cash, I will not sustain for a long time.

Question 33

Operating cycle elements

Answer 33

Cash - Purchases - Inventories - Sales - Receivables -Collections - Cash.

Question 34

the objective from operating cycle

Answer 34

is to manage our inventory and our receivables so that we convert our inventory into cash as quickly as is reasonably possible.

Question 35

Why do we have cash at all in our hands?

Answer 35

It turns out that bills have to be paid in cash.

Employees have to be paid in cash.

Rent has to be paid in cash.

Insurance has to be paid in cash.

Therefore, we’ve got to manage our cash to ensure that we have it when we need it.

Question 36

Receivable

Answer 36

The amounts of money owed to us by customers.

Question 37

Variable costs

Answer 37

A cost that changes depending on the number of goods produced or services provided.

Question 38

Fixed costs

Answer 38

A cost that stays the same no matter how many goods or services are provided.

Question 39

Contribution margin

Answer 39

The difference between the selling price and the variable costs.

Question 40

Overhead costs

Answer 40

Business expenses that are not tied directly to generating revenue.

Question 41

Break-Even Point

Answer 41

The point where fixed costs are exactly covered. No gain and no loss.

Question 42

How to calculate Break-Even Point?

Answer 42

Fixed costs / Contribution margin = Break-even point.

Question 43

Take this example of break-even point.

Answer 43

Fixed costs is 3000$ / Contribution margin is 1.5$ = 2000 items need to be sold in order to break-even point.

In another word we need to sell 2000 items to cover our fixed costs.

Question 44

Budgeting steps

Answer 44

1- Write down your budget. a goal isn’t written is just a wish.

2- Identify those areas for which you are responsible and which you control.

3- Quantify expected results.

4- Compare actual results to the budget.

5- Ask questions to determine why deviations from the plan occurred.

Question 45

Transaction

Answer 45

A business exchange something and gets something in return.