WHAT WE KNOW FOR SURE – Part 3 – Financial Pressure

We posted COVID, STRATEGY, AND WHAT WE KNOW FOR SURE about a week ago. Here are some further comments and observations about the second “known.”

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Gee, about a year ago, things were simple. Put together a good strategy and ride it into the future. Sweet!

BAM! COVID-19! >>>>> FINANCIAL PRESSURE WILL INCREASE!

OK, it’s obvious that financial pressures have and will increase. The question you might want to dig into is “So, how much should I, a non-expert but an up-and-coming leader, need to know?”

See if the following list list makes you nervous. If so, start learning just a wee bit more about the magic stuff (money) that keeps your business running.

Profit and Loss Statement

  • Net Sales
  • Cost of Goods Sold
  • Merchandise/Product Margins
  • Net Profit
  • Cash vs. Non-Cash Items
  • Accrual Reporting vs. Cash Reporting
  • Variance Analysis
  • Are you really making money? How much profit does the company make on $1 of revenue?

Balance Sheet

  • Types of Assets
  • Types of Debt
  • Owners Equity

Cash Flows

  • Operating
  • Investing
  • Financing

Meaning of Basic Financial Ratios

  • DuPont ROE Model
  • Return on Investment
  • Return on Sales
  • Return on Assets
  • Impact of Leverage/Borrowing

Budgets

  • How to Budget
  • Variance Analysis

Don’t get snowed as the world changes around you. Financial literacy is needed at ALL levels of leadership.

Reader Interactions

Comments

  1. WC says

    As a middle Manager in for-profit businesses and one not-for profit business, I can certainly agree that being more than conversant with these concepts is essential to success. There are some nuances in the nonprofit world, but as the president of that organization that I worked for said, “We’re not for profit, but we’re not for lost, either. We referred to product and service net profit as “contribution to overhead.”

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