The Vest Pocket CFO

THE VEST POCKET CFO, Second Edition......Page 3
ABOUT THE AUTHORS......Page 7
CONTENTS......Page 9
WHAT THIS BOOK WILL DO FOR YOU......Page 19
ACKNOWLEDGMENTS......Page 23
PART 1: REPORTS AND FILINGS......Page 25
CHAPTER 1: CHIEF FINANCIAL OFFICER’S REPORTS......Page 27
GOVERNMENTAL REPORTING......Page 32
OTHER REPORTING......Page 33
CHAPTER 2: SECURITIES AND EXCHANGE COMMISSION FILINGS......Page 35
PART 2: FINANCIAL ACCOUNTING......Page 39
CHAPTER 3: FINANCIAL STATEMENT REPORTING: THE INCOME STATEMENT......Page 41
REVENUE RECOGNITION......Page 44
EXPENSE RECOGNITION......Page 52
CHAPTER 4: FINANCIAL STATEMENT REPORTING: THE BALANCE SHEET......Page 59
CHAPTER 5: THE STATEMENT OF CASH FLOWS......Page 103
ANALYSIS OF THE STATEMENT OF CASH FLOWS......Page 106
ACCOUNTING CHANGES......Page 115
CHAPTER 7: KEY FINANCIAL ACCOUNTING AREAS......Page 133
INVESTMENTS IN STOCKS AND BONDS......Page 135
LEASES......Page 145
PENSION PLANS......Page 155
POSTRETIREMENT BENEFITS EXCLUDING PENSIONS......Page 163
INCOME TAX ALLOCATION......Page 166
FOREIGN CURRENCY ACCOUNTING......Page 175
CHAPTER 8: INTERIM AND SEGMENTAL REPORTING......Page 184
PART 3: MANAGEMENT ACCOUNTING......Page 195
CHAPTER 9: COST MANAGEMENT AND ANALYSIS......Page 197
CHAPTER 10: COST-VOLUME-PROFIT ANALYSIS AND LEVERAGE......Page 215
CHAPTER 11: SHORT-TERM DECISIONS......Page 228
CHAPTER 12: FINANCIAL FORECASTING, PLANNING, AND BUDGETING......Page 241
THE CASH BUDGET......Page 257
BUDGETING SOFTWARE......Page 261
THE LATEST GENERATION OF BUDGETING AND PLANNING (B& P) SOFTWARE......Page 266
CHAPTER 13: RISK MANAGEMENT......Page 270
AN APPROACH TO RISK MANAGEMENT......Page 271
HOW TO REDUCE INVESTMENT RISK: DIVERSIFY......Page 272
BETA — THE CAPITAL ASSET PRICING MODEL (CAPM) What is Beta?......Page 276
THE ARBITRAGE PRICING MODEL (APM)......Page 279
CHAPTER 14: CAPITAL BUDGETING......Page 281
TIME VALUE FUNDAMENTALS......Page 282
PAYBACK PERIOD......Page 287
THE NET PRESENT VALUE METHOD......Page 289
INTERNAL RATE OF RETURN......Page 290
LIMITED FUNDS FOR CAPITAL SPENDING......Page 293
EFFECT OF INCOME TAXES ON CAPITAL BUDGETING DECISIONS......Page 297
CHAPTER 15: WHAT AND WHY OF RESPONSIBILITY ACCOUNTING......Page 304
COST CENTER PERFORMANCE AND STANDARD COSTS......Page 307
FLEXIBLE BUDGETS AND PERFORMANCE REPORTS......Page 312
PRODUCTION MIX AND YIELD VARIANCES......Page 317
CHAPTER 16: CONTROL OF PROFIT CENTERS......Page 323
PROFIT VARIANCE ANALYSIS......Page 325
RATE OF RETURN ON INVESTMENT (ROI)......Page 334
INVESTMENT DECISIONS UNDER ROI AND RI......Page 335
TRANSFER PRICING......Page 337
CHAPTER 18: HOW TO ANALYZE AND IMPROVE CORPORATE PROFITABILITY AND SHAREHOLDER VALUE......Page 343
BALANCED SCORECARD......Page 353
ECONOMIC VALUE ADDED (EVA)......Page 355
MORE ON NOPAT......Page 357
CAPITAL CHARGE......Page 358
A CAVEAT......Page 361
SUSTAINABLE GROWTH MODELING......Page 362
VALUE OF SUSTAINABLE GROWTH MODELING......Page 363
SUSTAINABLE GROWTH MODELING VARIABLES......Page 364
STEADY-STATE SUSTAINABLE GROWTH MODEL......Page 365
HOW TO MANAGE GROWTH......Page 366
SIMULATION OF HOW TO MANAGE GROWTH......Page 368
ANALYSIS OF DATA......Page 370
SIMULATIONS USING SUSTAINABLE GROWTH MODELING — SOLVING FOR OTHER VARIABLES......Page 372
STRATEGIC PLANNING IMPLICATIONS......Page 373
HOW TO USE THE GOAL SEEK COMMAND IN EXCEL......Page 374
CONCLUSION......Page 375
PART 4: MANAGEMENT OF ASSETS AND PAYABLES......Page 377
EVALUATING WORKING CAPITAL......Page 379
CASH MANAGEMENT......Page 380
BANKING RELATIONSHIPS......Page 394
INTERNATIONAL CASH MANAGEMENT......Page 395
CHAPTER 21: MANAGEMENT OF ACCOUNTS RECEIVABLE......Page 397
INVESTMENT IN ACCOUNTS RECEIVABLE......Page 401
CHAPTER 22: INVENTORY MANAGEMENT......Page 410
THE ECONOMIC ORDER QUANTITY (EOQ)......Page 417
THE REORDER POINT......Page 419
HOW TO FIND THE OPTIMAL STOCK SIZE......Page 422
SERVICE BUSINESS......Page 426
ACCOUNTS PAYABLE SYSTEM......Page 428
PART 5: FINANCING THE BUSINESS......Page 433
SHORT-TERM FINANCING......Page 435
INTERMEDIATE-TERM FINANCING......Page 450
CHAPTER 25: LONG-TERM FINANCING......Page 459
TYPES OF LONG-TERM DEBT AND WHEN EACH SHOULD BE USED......Page 460
THE ISSUANCE OF EQUITY SECURITIES......Page 469
FINANCING STRATEGY......Page 478
WARRANTS......Page 488
CONVERTIBLE SECURITIES......Page 491
COST OF DEBT......Page 498
COST OF PREFERRED STOCK......Page 499
COST OF EQUITY CAPITAL......Page 500
HISTORICAL WEIGHTS......Page 502
TARGET WEIGHTS......Page 504
EBIT-EPS APPROACH TO CAPITAL STRUCTURE DECISIONS......Page 505
ANALYSIS OF CORPORATE CASH FLOWS......Page 508
COVERAGE RATIOS......Page 509
CAPITAL STRUCTURE DECISIONS......Page 511
CHAPTER 28: DIVIDEND POLICY......Page 512
CHAPTER 29: FINANCIAL MANAGEMENT OF MULTINATIONAL CORPORATIONS......Page 518
TRANSLATION EXPOSURE......Page 523
TRANSACTION EXPOSURE......Page 524
OPERATING EXPOSURE......Page 528
INTEREST RATES......Page 529
INFLATION......Page 530
APPRAISING FOREIGN INVESTMENTS......Page 531
EXAMPLES OF POLITICAL RISKS......Page 532
FINANCING......Page 546
ANALYSIS OF FOREIGN INVESTMENTS......Page 548
PART 6: FINANCIAL ANALYSIS......Page 561
CHAPTER 30: FINANCIAL STATEMENT ANALYSIS......Page 563
BALANCE SHEET ANALYSIS......Page 565
POTENTIAL FOR BUSINESS FAILURE......Page 584
INCOME STATEMENT ANALYSIS......Page 588
MARKET VALUE RATIOS......Page 594
ANALYZING THE FINANCIAL STRUCTURE OF THE FIRM......Page 595
CONTROL REPORTS......Page 603
CONTROL OF COSTS......Page 606
CHAPTER 32: INSURANCE AND LEGAL CONSIDERATIONS......Page 610
TYPES OF INSURANCE......Page 612
BUSINESS LAW......Page 619
CHAPTER 33: BASICS OF ECONOMICS......Page 621
INDICES OF LEADING, COINCIDENT, AND LAGGING ECONOMIC INDICATORS......Page 627
OTHER IMPORTANT ECONOMIC INDICES......Page 629
MONETARY INDICATORS AND HOW THEY IMPACT THE ECONOMY......Page 631
UNDERSTANDING ECONOMIC DATA AND INDICATORS......Page 638
PART 7: INVESTMENTS......Page 643
CHAPTER 34: CORPORATE INVESTMENTS IN SECURITIES......Page 645
TERMS AND FEATURES OF BONDS......Page 648
MORTGAGES......Page 658
OTHER FIXED INCOME INVESTMENTS......Page 660
PART 8: TAXATION......Page 667
CHAPTER 35: TAX FACTORS IN FINANCIAL DECISION MAKING......Page 669
PART 9: MERGERS, DIVESTITURES, FAILURE, AND REORGANIZATION......Page 679
CHAPTER 36: MERGERS AND ACQUISITIONS......Page 681
CAPITALIZATION OF EARNINGS......Page 682
CAPITALIZATION OF EXCESS EARNINGS......Page 685
PRESENT VALUE OF FUTURE CASH FLOWS......Page 686
TANGIBLE NET WORTH......Page 688
FAIR MARKET VALUE OF NET ASSETS......Page 689
CAPITALIZATION OF REVENUE......Page 690
PRICE-EARNINGS RATIO......Page 691
SIMILAR BUSINESSES......Page 692
COMBINATION OF METHODS......Page 693
ACCOUNTING ADJUSTMENTS......Page 694
CHAPTER 37: DIVESTITURE......Page 695
ASSET VALUATION METHODS......Page 697
PROFITABILITY METHODS......Page 698
DISCOUNTED CASH FLOW ANALYSIS......Page 699
AN ILLUSTRATION: DISCOUNTED CASH FLOW ANALYSIS......Page 700
DIVESTITURE WITH UNCERTAINTY......Page 703
CHAPTER 38: FORECASTING CORPORATE FINANCIAL DISTRESS......Page 706
CHAPTER 39: FAILURE AND REORGANIZATION......Page 728
INDEX......Page 750