Corporate Finance for Dumbasses

Chapter 1: An Introduction

1. Why this series exists 
2. Why  people feel dumb around finance 
3. What you can expect from this series 
4. Why corporate finance matters 
5. Personal finance vs corporate finance 
6. How companies earn, spend, borrow, invest and expand 

Chapter 2: The Principal Financial Statements

1. The three main financial statements 
2. Balance Sheet 
3. Income Statement / Profit and Loss Statement 
4. Cash Flow Statement 
5. Who uses financial statements? 
6. How financial statements follow a standard format 

Chapter 3: The Balance Sheet

1. What is a Balance Sheet? 
2. Asset  side and Liability + Equity side 
3. What are assets? 
4. Current assets 
5. Fixed assets 
6. Property, Plant and Equipment 
7. Depreciation      
8. Accumulated depreciation 
9. Gross PPE and Net PPE 
10. Goodwill
11. Intangible assets 
12. Why internally created brand value may not appear in the Balance Sheet 
13. What are liabilities? 
14. Current liabilities 
15. Long-term liabilities 
16. Owners’ Equity / Shareholders’ Equity 
17. Contributed capital / paid-in capital 
18. Retained earnings 
19. How the Balance Sheet connects everything 
20. Historical cost 
21. Why Balance Sheet values may differ from market values 
22. Importance of the Balance Sheet 
23. Working capital 
24. Inventory position 
25. Financial  leverage 
26. Debt-equity position 

Chapter 4: The Income Statement / Profit and Loss Statement

1. What is an Income Statement? 
2. Why it is also called the Profit and Loss Statement 
3. Standalone P&L Statement 
4. Consolidated P&L Statement 
5. Why the Income Statement is important 
6. What the Income Statement shows 
7. Main categories in a P&L Statement 
8. Revenue from Operations 
9. Other Income 
10. Cost of Materials Consumed 
11. Purchases of Stock-in-Trade 
12. Changes in Inventory 
13. COGS - Cost of Goods Sold 
14. Inventory  movement from Balance Sheet to P&L 
15. Employee Benefit Expenses 
16. Finance Costs 
17. Depreciation and Amortisation 
18. Other Expenses 
19. Tax  Expense 
20. Net Profit / Loss 
21. How thousands of transactions become a P&L Statement 
22. Revenue from Operations vs Other Income 

Chapter 5: The Cash Flow Statement

1. What is a Cash Flow Statement? 
2. Why profit is not the same as cash 
3. Cash inflow and cash outflow 
4. Operating activities 
5. Investing activities 
6. Financing activities 
7. Why depreciation is added back in cash flow 
8. Accounts receivable and cash collection 
9. Accounts payable and cash timing 
10. Why a profitable company can still run out of cash 
11. How the Cash Flow Statement connects with the Balance Sheet 
12. How the Cash Flow Statement connects with the Income Statement 

Chapter 6: Connecting the Three Statements

1. How one transaction affects all three statements 
2. Owner invests money into the company 
3. Company buys inventory 
4. Company  sells goods on credit 
5. Company  receives cash later 
6. Company buys machinery 
7. Depreciation across all three statements 
8. Inventory moving from Balance Sheet to P&L 
9. Profit moving to retained earnings 
10. Closing cash appearing in the Balance Sheet 

Chapter 7: Introduction To Ratio Analysis

1. What is ratio analysis? 
2. Why ratios are needed 
3. Why one number alone means nothing 
4. Comparing with previous years 
5. Comparing  with competitors 
6. Comparing with industry averages 

Chapter 8: Financial Health & Stability Ratios

1. Profitability Ratios

• Gross Profit Margin 
• Net Profit Margin / Return on Sales (ROS) 
• Operating Margin / EBIT Margin 
• Return on Assets (ROA) 
• Return on Equity (ROE) 

        2. Liquidity Ratios

• Current Ratio 
• Quick Ratio 

        3. Leverage Ratios

• Interest Coverage Ratio 
• Debt-to-Equity Ratio 

        4. Cash Flow Ratios

• Operating Cash Flow Ratio 
• Cash Flow to Debt Ratio 

Chapter 9: Business Performance & Market Ratios

        1. Operating / Efficiency Ratios

• Asset Turnover / Asset Velocity 
• Receivable Days / Days Sales Outstanding (DSO) 
• Days Payable / Days Payable Outstanding (DPO) 
• Days in Inventory / Inventory Days (DII) 
• Cash Conversion Cycle (CCC) 
• Positive Cash Conversion Cycle 
• Negative Cash Conversion Cycle 

        2. Growth Ratios

• Sales Growth
• Profit Growth
• EPS Growth
• Asset Growth

        3. Valuation Ratios

• Earnings Per Share (EPS)
• Price-to-Earnings Ratio (P/E Ratio)
• Price-to-Book Ratio (P/B Ratio)
• Dividend Yield

        4. Productivity Ratios

• Sales per Employee 
• Profit per Employee 
• Revenue per Machine Hour 
• Output per Worker 
• Shop-floor Manpower Productivity Ratio

Chapter 10: Working Capital

1. What is working capital? 
2. Current assets – current liabilities 
3. Why working capital matters 
4. Too little working capital 
5. Too much working capital 
6. Inventory and working capital 
7. Receivables and working capital 
8. Payables and working capital 
9. Cash conversion cycle 
10. How managers can improve working capital
11. Days Sales Outstanding
12. Inventory Management

Chapter 11: Budgeting and Managing Costs

1. What is a budget? 
2. Why departments have budgets 
3. Fixed costs 
4. Variable costs 
5. Operating expenses 
6. Cost control 
7. Why discounts can hurt profit 
8. Why marketing spends must be measured 
9. Managing a departmental P&L 

Chapter 12: Break-even Analysis

1. What is break-even? 
2. Why break-even matters before starting a project 
3. Fixed cost and variable cost 
4. Contribution margin 
5. Break-even quantity 
6. Break-even sales value 
7. Margin of safety 
8. Operating leverage 
9. How discounts affect break-even 
10. Limitations of break-even analysis 

Chapter 13: ROI and Investment Decisions

1. What is ROI? 
2. Why ROI matters 
3. Cost-benefit analysis 
4. Quantifiable benefits and costs 
5. Nonquantifiable benefits and costs 
6. Payback period 
7. Capital investment decisions 
8. Buying machinery example 
9. Software purchase example 
10. How to defend a budget request using ROI 
11. How to sell an idea using numbers 

Chapter 14: What Financial Statements Do Not Tell You

1. Limits of financial statements 
2. Human capital 
3. Brand value 
4. Customer trust 
5. Reputation      
6. Management quality 
7. Innovation and future potential 
8. Why many valuable things are missing from the Balance Sheet 
9. Why numbers matter, but numbers are not everything

Chapter 15: Reading Real Financial Statements

        1. Balance Sheet

        2. Profit & Loss Statement / Income Statement

        3. Cash Statement 

        4. Ratio Analysis 

        5. Market Valuation Comparison: Same Industry but one gets a Higher Price Tag

Chapter 16: Final chapter - So, this was finance