Finance for non-financiers

Programme

The concept of business value growth. Main financial indicators

• The company's main financial goal — growth in market value: Market-to-book, ROE, PE
• Alternative company valuation models: the book value model, the comparables method, the discounted future cash flow method
• The concept of increasing efficiency and reducing business risks

The company's financial statements: purpose and principles of construction

• Users of the statements, their goals and interests
• Similarities and differences between tax, financial and management reporting
• The purpose of IFRS and national standards
• Basic concepts of financial reporting and their meaning

Workshop: line items of the statements, analysis of business transactions

The balance sheet: information about the company's investments and the sources of their financing

• Analysing the structure of assets and liabilities, analysing the dynamics of balance sheet items, identifying positive and negative trends
• Purpose and structure of the Balance Sheet
• Industry differences in balance sheets
• Analysing the structure and dynamics of balance sheet items, identifying positive and negative trends

Workshop: analysing the balance sheet structure, analysing industry differences in balance sheets

The profit and loss statement: the value chain. Types of profit and their dynamics

• The profit and loss statement (P&L)
• Understanding the differences between profit indicators: operating profit, EBITDA, EBIT, net profit
• The purpose of profit indicators
• Industry specifics of the P&L
• Analysing the structure and dynamics of the company's P&L items, identifying positive and negative trends

Workshop: analysing the company's P&L

The cash flow statement

• Structure of the Cash Flow Statement (CFS)
• CFS structure and the business development cycle
• Industry specifics of the CFS
• Analysing the CFS structure, identifying positive and negative trends

Workshop: analysing the company's CFS

Comprehensive analysis of the company

• Return on sales
• Return on assets, factors of return on assets: operating efficiency (profit margins) and asset turnover
• Return on equity and its factors: financial leverage
• Liquidity, solvency and the net working capital indicator
• How industry specifics show in the indicators of comprehensive analysis
• Management decisions that help improve the indicators of comprehensive analysis

Workshop: comprehensive analysis of the company

Working capital management

• The operating cycle and its structure
• Calculating the company's operating cycle and its components: receivables, payables and inventory turnover
• Management decisions that help improve working capital performance

Workshop: calculating the company's operating cycle from its statements

Operating analysis

• CVP analysis and its basic concepts
• The break-even point and the margin of safety
• Applying contribution margin analysis to management decision-making

Workshop: operating analysis of the company
Workshop: choosing between alternative production options using contribution margin analysis

Integrated practical assignment

The impact of management decisions on the company's financial position
Instructions:
(1) Participants (in groups) pick a «ticket» with three types of management decisions
(2) They discuss the impact of the management decisions on the various items of the company's financial statements, on the company's performance indicators, business risks and, as a result, the company's value (market and alternative)
They record the results of the discussion in a Table (handed out at the training; it records whether there is an impact on the item, the sign (+ or -) and the timing («immediately» and "in a year"))
(4) They briefly present their conclusions
The assignment is done in 2 rounds; between rounds participants receive feedback from the trainer (2 tickets per group in total)

Summing up