What is cash vs. non-cash? | Brian Feroldi posted on the topic | LinkedIn (2024)

Finance for Non-Financial Managers | (04)Financial ReportsFinancial reports are different forms of financial information. A financial report is a formal record of the financial activities and position of a business, organization, or individual. It provides a summary of key financial information over a specific period, typically covering aspects such as income, expenses, assets, liabilities, and equity. Financial reports are essential tools for stakeholders, including management, investors, creditors, and regulatory authorities, to assess the financial health and performance of an entity.Financial reports play a crucial role in decision-making, financial planning, and accountability. They are often prepared in accordance with accounting standards and regulatory requirements to ensure accuracy and consistency.Here are some common types of financial reports:1.Income Statement (Profit and Loss Statement): This report summarizes revenues, costs of goods sold, and expenses over a specific period to calculate net income or loss. ·Revenue – Amount of assets generated by business ·Expenses – Amount of assets consumed by business ·Net Income – Net Assets generated by business2.Balance Sheet: This report provides a snapshot of an entity's financial position at a specific point in time, listing its assets, liabilities, and equity. ·Asset - is something of value, such as cash, real estate, or property. (i)Current Assets (e.g., cash, accounts receivable) (ii)Fixed Assets (e.g., property, equipment) ·Liability - is a financial obligation, such as debt. Liabilities can be current or long-term. ·Equity – is the finance provided by the company’s owner. Owners can do it in two ways (i) Paid-In Capital (putting money from pocket) (ii)Retained Earnings (putting money from profits)A balance sheet should be balanced i.e. Assets = Liabilities + Equity (also called accounting equation)3.Cash Flow Statement: Cash flow is the movement of money into and out of a business or household. This report outlines the cash generated (cash-in) and used (cash-out) during a specific period, categorized into operating, investing, and financing activities. Cash flow is the movement of money into and out of a business or household. ·Operating Activities – daily activities within the business ·Investing Activities – occasional activities to enhance productive capacity of business ·Financing Activities – activities related to financial arrangements like Issuing or Repurchasing Stock, Issuing or Repurchasing Debt, Payments of Dividends etc. PS: If readers can add something, it will help to correct, improve or learn. Thanks!

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Profit and Loss Statements (P&L): A Guide for Non-Finance EmployeesThe Profit and Loss (P&L) is the central tool for understanding your company's performance and making informed decisions about its future.Key Components of a P&L Statement📈 Revenue: This is the total income your company generates from sales of goods or services. It includes income from both regular customers and one-off transactions.📈 Cost of Goods Sold (COGS): This is the direct expenses incurred in producing or acquiring the goods or services your company sells. It includes costs like raw materials, labor, and manufacturing overhead.📈 Gross Profit: This is calculated by subtracting COGS from revenue. It represents the money your company has left after covering the direct costs of producing or acquiring its goods or services.📈 Operating Expenses: These are the indirect expenses incurred in running your company's day-to-day operations. They include costs like rent, utilities, salaries, and marketing.📈 Operating Income: It represents the profit your company generates before considering interest and taxes.📈 Interest Expense: This represents the amount of money your company pays in interest on loans or other debts.📈 Earnings Before Income Tax (EBIT): This is calculated by subtracting interest expense from operating income. It represents the profit your company generates before accounting for income taxes.📈 Income Tax Expense: This represents the amount of money your company pays in income taxes.📈 Net Profit (Loss): This is the final figure on the P&L statement and represents the overall profit or loss your company has made after considering all revenues, expenses, and taxes.Analyzing Your P&L StatementRegularly reviewing your P&L statement can help you:💡 Identify Profitable Areas: Track your revenue sources to determine which products or services are generating the most profit.💡 Control Expenses: Monitor your operating expenses to identify areas where you can reduce spending.💡 Track Financial Performance: Compare your P&L statements over time to assess your company's financial progress and identify trends.Actionable Insights for Operational EmployeesAs an operational employee, understanding the P&L statement can help you:➡ Contribute to Profitability: Identify opportunities to improve efficiency and reduce costs within your department.➡ Support Informed Decisions: Provide insights to management that can inform strategic decisions about pricing, marketing, and resource allocation.➡ Demonstrate Value: Showcase your understanding of the company's financial performance and contribute to its overall success.By understanding the key components and analyzing your company's P&L, you can play a significant role in contributing to your company's success.#Finance #Business #ProfitAndLoss #PNLStatement #FinancialAnalysis #OperationalExcellence #CostControl #Profitability #InformedDecisions #VirtualCFO #VietnamCFO #FractionalCFO

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This post is about personal finance. 💰Hello, LinkedIn network! Many of my friends have been curious about how I manage my finances. While I'm not exactly sure why they turned to me for advice, I spent several hours explaining my system to them. After receiving positive feedback, I've decided to share it with my LinkedIn network, though I must emphasise that this is not financial advice 💁♂️. ⚙️At the core of the financial system, I abide by some fundamental principles:- 💪 Keep it Efficient: My system requires no more than 2 hours of monthly maintenance. Investing too much time can lead to losing focus and eventually giving up.- 🧐 Simplify Expense Monitoring: I invest almost no mental effort in constantly monitoring expenses, as doing so can be overwhelming.- 📈 Long-Term Investing: I avoid cashing out long-term investments, especially during market downturns, to allow them to grow and thrive.📚The foundation of this system lies in creating buffers between income and expenses, serving two primary purposes:- Creating an emergency safety net- Planned Expenses Wallets: I maintain a buffer to cover non-monthly expenses, ensuring I can afford them without depleting my safety net⚖️ Here's a breakdown of my buffer and account structure (refer to the attached screenshot for a visual representation):-Monthly Buffer, which is composed by these: ---Fast-moving expenses buffer (Rent/food/entertainment/charity etc.) ---Medicine buffer ---Presents buffer ---Gadgets buffer ---Travel buffer-Safety Net-Long-Term Investments🎯The concept is straightforward. I have pre-determined amounts allocated for monthly expenses like rent, food, and entertainment. Additionally, I allocate specific amounts for medicine, presents, gadgets, and travel expenses based on an annual estimate. For instance, to renew my laptop every four years, I contribute around $20 USD to my gadgets account each month.✅ Any remaining funds go into the safety net buffer, which continues to grow until it reaches the equivalent of 6 months' worth of expenses. Once that's achieved, I can focus on long-term investments.📚To implement this structure, follow these steps and make adjustments annually:-Assemble a chart of accounts/buffers tailored to your needs.-Determine your monthly budget for day-to-day expenses.-Calculate your yearly budget for mid-term purchases (e.g., gadgets, medicine, travel, etc.) and set the required monthly deposits to these accounts.✨Maintaining the structure is a breeze: -Each month, allocate your income into the designated accounts (typically takes around 15 minutes). -For significant purchases, like a Macbook, I check the gadgets account. If there isn't enough money yet - bad luck, try again next month, this allows you to stick to the budget.I hope you found this post interesting! Feel free to share your ideas and money hacks in the comment section.

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Running a business needs a decent knowledge on finance. Start learning of it with small steps

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Please take a glance.Some of the most confused Finance Topics we frequently encounter while dealing with business.

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INCOME VS EXPENSESAs we progress further this week, the knowledge of cash flow is necessary for the management of cash floatation, both in personal and corporate finance. the basic summary analysis of the operations of cash flow is tied to income and expenses.As an individual, your financial performance is traceable to these two areas. The knowledge of cash flow will guide you in setting up a procedure to account for cash flow operations in your daily activities. Income is the amount that is earned and received. It can also be regarded as cash inflow. This can come in form of salary (monthly payment), wages (daily, weekly payment), donations in form of cash etc. Expenses on the other hand, are referred to as cash outflows. This is the cash that is spent on purchasing commodities, such as goods and services. Without cash, it is impossible to make transactions possible. Cash are pivot to the procurement of purchases. Examples are assets procured, transactions made in form of payments. As an accountant, we must consistently seek to provide a detailed financial report on the outcome of cash flow operations and strike a balance between income and expenses, in application to our personal and corporate finance goals.The importance of budgeting is to provide an overview of cash utilization to meet our finance goals.There is also a need of consistent application of accounting system to evaluate the performance of cash flow operations daily, weekly, monthly and periodically to enhance cash flow management. When your expenses is above your income, the resultant effect is to arrive at a deficit level. On the other hand, when your income surpasses your expenses, the outcome is Surplus. As you progress further this week. To aid your financial evaluation and account preparation, the knowledge of accounting for non - profit making organization provides the approach to evaluate your personal finance performance, which contains, detailed income earned, received and expenses procured.Have a blessed week..

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Demystifying Finance for Non-Finance Managers: A Guide by HNI.aeFor non-finance managers, navigating the world of financial statements, budgets, and investment decisions can feel like deciphering an ancient language. But fret no more! This comprehensive guide by HNI.ae aims to bridge the knowledge gap and empower you with the financial literacy you need to excel in your role.Why Financial Literacy Matters for Non-Finance Managers?Even if you're not directly involved in the financial department, understanding financial concepts is crucial for any manager. It allows you to:Make informed decisions: From resource allocation to project budgeting, sound financial understanding helps you make strategic choices that contribute to the company's bottom line.Evaluate performance: Financial metrics provide a clear picture of the company's health and your department's contribution.Communicate effectively: Discussing budgets, investments, and financial goals with colleagues and superiors becomes easier when you share a common financial language.Build credibility and trust: Financial literacy demonstrates your commitment to the company's overall success and inspires confidence in your leadership.Financial Fundamentals for Non-Finance ManagersLet's delve into some key financial concepts you'll encounter as a manager:Financial Statements: These are the cornerstones of financial reporting, providing a snapshot of the company's financial health. There are three main statements:Balance Sheet: This shows what the company owns (assets) and owes (liabilities) at a specific point in time. It essentially answers the question: "What is the company worth?"Income Statement: This reflects the company's revenue and expenses over a period, essentially revealing how much money the company made (or lost).Cash Flow Statement: This details the company's cash inflows and outflows from operating, investing, and financing activities. It highlights the company's ability to generate cash.Financial Ratios: These are mathematical tools used to analyze different aspects of a company's financial performance. Some common ratios include:Profitability Ratios: Measure how effectively a company generates profit (e.g., profit margin, return on equity).Liquidity Ratios: Assess a company's ability to meet its short-term obligations (e.g., current ratio, quick ratio).Solvency Ratios: Evaluate a company's long-term financial health and ability to repay debt (e.g., debt-to-equity ratio).Budgeting and Forecasting:Creating a realistic budget helps you plan for future expenses and allocate resources effectively. Forecasting involves predicting future financial performance based on historical data and current trends.https://hni.ae/finance/

20 Most Confused Finance TopicsCredits to Oana Labes, MBA, CPA, follow her for more practical finance content.------Here's the original post:20 Most Confused Finance Topics you shouldn't confuse.1. Cash Flow vs. Profit- Profit can exist on paper due to non-cash expenses like depreciation, cash flow links to the actual cash on hand.2. Assets vs. Liabilities- Assets add value; liabilities represent claims against those assets.3. Capital Expenditure (CapEx) vs. Operating Expenditure (OpEx)- CapEx is for long-term investments, OpEx is for short-term operating expenses.4. Gross Margin vs. Net Margin- Gross margin focuses on production efficiency, Net Margin on overall profitability.5. EBITDA vs. Net Income- EBITDA is operational profitability, net income is bottom-line profit.6. Return on Investment (ROI) vs. Return on Equity (ROE)- ROI focuses on investment efficiency, ROE on equity efficiency.7. Profit vs. Revenue8. Market Capitalization vs. Enterprise Value- Market cap is equity value, enterprise value includes debt and cash.9. Fixed Costs vs. Variable Costs- Fixed costs remain constant, variable costs fluctuate with output.10. Financial Leverage vs. Operating Leverage- Financial leverage is debt-related, operating leverage is revenue-related.11. Book Value vs. Market Value12. Accrual Accounting vs. Cash Accounting13. Liquidity vs. Solvency- Liquidity is short-term health, solvency is long-term stability.14. Depreciation vs. Amortization- Depreciation applies to physical assets, amortization to intangible assets or loans.15. Interest Rate vs. Annual Percentage Rate (APR)- APR includes additional costs beyond the basic interest rate.16. Dividends vs. Capital Gains- Dividends are profit sharing, capital gains are from asset appreciation.17. Inflation vs. Deflation- Inflation is more money for fewer goods, deflation is less money for more goods.18. Credit Risk vs. Market Risk- Credit risk is counterparty failure, market risk is market movements.19. Leverage Ratio vs. Coverage Ratio- Leverage ratio assesses debt level, coverage ratio assesses payment ability.20. Budgeting vs. Forecasting- Budgeting is a plan for future finances, forecasting predicts future financial results.-------🛎️ Want to Improve your strategic decision-making, accelerate your career, and grow your business :Start with 𝗢𝗮𝗻𝗮 𝗟𝗮𝗯𝗲𝘀’𝘀 𝗧𝗵𝗲 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 𝗠𝗮𝘀𝘁𝗲𝗿𝗰𝗹𝗮𝘀𝘀: https://lnkd.in/dUYRWRYH💠 50+ Lessons to Help you Achieve Mastery💠 10+ Cash Flow Management Infographics💠 10+ Excel Templates and Practice Files-------Follow Business Infographics to learn from the best visuals.

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