Financial Ratios How to use financial ratios to maximise value and success for your business 1st Edition by Richard Bull 9780750684538 0750684534
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Product details:
ISBN 10:0750684534
ISBN 13: 9780750684538
Author:Richard Bull
Have you ever worried about being expected to understand what finance people are saying when they quote ‘gearing ratios’ or ‘equity yields’ at you? Whether you are in a large organization or just starting out on your own you will want to avoid missing something important and know how you can achieve the financial targets that are critical to you and your business.
It is important for all those engaged in business to understand how financial ratios can be used to measure the performance of a business. This has never been more urgent and important, when corporate frauds and corporate governance are high on the public agenda. However it is also important to understand how they can be used positively to maximize value and success in a business.
This book covers the full scope of business. It uses a model, the Enterprise Stewardship Model which has received international acclaim, to illustrate the power – and the limitations – of financial ratios and explore the tangible and intangible aspects of creating value in a business. It shows how ratios can be used to describe, measure, and help to maximize, value and success. And it includes worked examples to illustrate how to generate and calculate key financial ratios.
The CD that is included with the book enables the reader to both understand and apply the subject for themselves through the use of interactive exercises. It also includes a short introductory video, a slide show and some structured questions to prompt a strategic business review using ratios.
Relationships are at the heart of this book. Ratios themselves are relationships – between different sets of numbers or measurements. It is important to understand them and be able to work with them. But is also important to understand and be able to work with people in a business and this book looks at different perspectives on a business and explores how financial ratios can be interpreted differently from different standpoints.
“A splendid job! You have made a complex subject highly accessible. It is very readable for anyone engaged in business whether in a small firm or a major corporation. – Peter Hutton, Managing Director of Brand Energy Research and formerly Group Development Director for MORI
“Great concept: nicely executed and well written. Financial Ratios has a logical structure and flows well – I really enjoyed reading it and couldn’t put it down! – Dr David Hillson FRSA FAPM FIRM FCMI, Director of Risk Doctor and Partners.
* Financial ratios can add value to any business – understand how
* Do you your customers need to understand what the finance department is telling them and what they should do about it?
* Understand the strengths and shortcomings of financial ratios which will help you grow and manage your business
* Accompanying CD enables the reader to both understand and apply the subject for themselves through the use of interactive exercises
Financial Ratios How to use financial ratios to maximise value and success for your business 1st Table of contents:
PART ONE The Role of Financial Ratios
Chapter 1 Creating value – a model of success
Introduction
Strategic management
Funding management
Asset management
Value add management
Tax management
Growth management
Chapter 2 Measuring value – the origin of financial ratios
Introduction
The value of strategy
The gearing ratio
The asset turnover ratio
The profit margin
The effective tax rate
The payout ratio
Composite ratios
The return on assets ratio
The return on equity ratio
The dividend yield
The composite test
PART TWO Understanding Financial Ratios
Chapter 3 Funding management – the gearing ratio
Key questions
How much is needed?
The matching principle
Where will the funds come from?
Forms of borrowing
Forms of ownership
How much will it cost?
Chapter 4 Asset management – the asset turnover ratio
Introduction
Disaggregating the asset turnover ratio
Tangible assets
Using the component ratios
Current asset turnover ratios
Fixed asset turnover ratios
Questions to ask: The time horizon
Chapter 5 Value add management – the profit margin
Introduction
The profit margin
Managing profit through adding value
Managing the cost margin
Managing the profit margin
Pricing for profit
The profit margin in the value chain
Managing value
Chapter 6 Tax management – the effective tax rate
Introduction
Management and administration
Two types of profit
Different rules
Common principles
Avoidance, evasion and making the best of it
Chapter 7 Growth management – the payout and retention ratios
Introduction
The distribution of profits – a simple decision?
The shareholder’s perspective – a return on investment?
The components of shareholder value
The company’s perspective – a vehicle for growth
The case for growth
Cash flows
Profit flows
Value flows
The options for growth
The sources of growth
PART THREE Using Financial Ratios
Chapter 8 The composite ratios
Introduction
Benchmarking – risks and opportunities
Summarising performance – the composite financial ratios
Conclusion
Chapter 9 The place of financial ratios in strategic management
Introduction
The foundations of strategic management
The place of financial ratios in strategy
The influence of strategy on financial ratios
Raising strategic questions
Making the strategic connection: creating value and success
Conclusion
Chapter 10 Perspectives on financial ratios
Introduction
The stakeholder groups
The customer-supplier perspective and the profit margin
The employee’s perspective and the return on assets ratio
The community perspective and the after-tax return on assets ratio
The shareholder and entrepreneur perspectives and the yield ratios
The leadership perspective on roles and relationships
Appendices
Appendix 1 The purpose of ratios: The three Eff’s
Appendix 2 The source and application of financial data for ratio analysis
Appendix 3 A benchmarking example
Appendix 4 Further reading
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