Understanding Financial Reports - Basic Course

Financial Intelligence
Ayman El-Najjar
Outline
• Introduction; the art of Finance and why it matters
• Income Statement; the many peculiarities of IS
• Balance Sheet; it reveals the most
• Cash Statement; cash is king
• Ratios; what the numbers are really telling
• Return on Investment; how to calculate ROI
• Working Capital Management; applied financial
intelligence
Aiming to become Financially Intelligent person – Ayman El-Najjar

What’s Financial Intelligence?
• Everyone in a company does better

when they understand how financial
success is measured and how they
have impact on the company’s
performance ...

• FI; set of skills that must be, and can
be, learned
• For most senior executives, they come
out of finance or pick up the skills during
their rise to the top
• It’s tough to run a business unless you
know what the financial folks are saying

4 skill Sets
• Understanding the foundation

• Understanding the art
• Understanding Analysis
• Understanding the big picture

• Financial intelligence need to be
learned, practiced, and applied
– Learn the Language
– Ask Questions
– Use the information

The Art of Finance & Why it Matters
You can’t always trust the numbers!!
• Accounting and Finance, like all other

business disciplines, really are as
much art as they are science.
– When is a sale a sale? (revenue
recognition game) …
• Xerox case – improperly recognized $6 billion!
– Determining whether a given cost is a
capital expenditure or operating
expenditure!

• If you don’t have a good working
understanding of the financial
statements and don’t know what those
folks are looking at or why, you are at
their mercy!!

Spotting Assumptions, Estimates, and Biases
Examples of the art of Finance Simple but critical Questions:

• Accruals • What were the
assumptions (‫ (الفتراضات‬in
• Allocations this number?
• Are there any estimates
• Depreciation (‫ (التقديرات‬in the numbers
• Valuation • What is the bias (‫(الميل‬
those assumptions and
estimates lead to?
• What are the implications
(‫?(التضمينات‬

Accr ual s
• The portion of a given revenue or
expense item that is recorded in a
particular time span
– e.g. Development Cost

Al locati ons
• apportionment of costs to different
departments or activities within a
company
– e.g. allocation of CEO salary to operating
units

workshop – Group Discussion
• In June, you worked on a new product

line, which was introduced in July. How
much of your salary should be matched
to product cost and how much to
development cost … Imagine that The
accountant determined that all your
salary should go to development cost in
June …

Depr eci ati on (‫(الستهلك‬
The method accountants use to allocate
the cost of equipment and other assets
to the total cost of products or services
as shown on the income statement
At attempt to spread the cost of the
expenditure over the useful life of the
item

Example – for discussion
• Accountants of Airline industry some
years back realized that their planes
were lasting longer. So, they changed
their depreciation schedules …
(assumptions, estimates, bias, implications)

Val uati on (‫(التقييم‬
• Methods of Valuation
– Price-to-Earning Ratio Method
– Discounted cash flow Method
– Asset Valuation Method
Each method entails a whole passel of

assumptions and estimates

Why Increase your Financial Intelligence?
• To understand what the numbers really

mean …
• As a leader, manager, employee, you
need to understand what’s happening in
the company from a financial
perspective, and use that information to
work and manage more effectively …
simply stated, to improve your decision
making

For you:
– Increased ability to critically evaluate your company
– Better understand the bias in the numbers
– The ability to use numbers and financial tools to
make and analyze decisions
For the company:

– better decisions,
– greater alignment,
– strength an balance throughout the organization

Roadblocks to Financial Savvy
• Hate Math!
• Finance and accounting department
• Your boss
• No Time!

The Players
• Chief Financial Officer (CFO):
management and strategy of the organization from
financial perspective. Oversees all financial
functions
• Treasurer:
building and maintaining banking relationship,
managing cash flow, forecasting, equity and
capital-structure decisions, investors relations

• Controller:
Financial reports, general accounting,
business analysis, financial planning, asset
management, internal control

Part 1 - Recap
• We know “What’s Financial Intelligence?”

• Why we need to be financially intelligent?
• We learned about the art of Finance?
• We are ready to ask 4 simple but critical
questions to spot assumptions, estimates,
biases and their implications

Income Statement
(‫(بيان قائمة الدخل‬
• Income statement shows revenue (‫المبيعات‬,(
expenses (‫ )المصروفات‬and profit ,(‫( الربح‬for a
period of time, such as a month, a quarter, or
year.
• It’s also called profit & loss statement (‫بيان الربح‬
‫والخسارة‬P&L, statement of earning ,(
• The bottom line of the income statement is
Net Profit (‫(صافي الربح‬, also known as net
income (‫صافي الدخل‬or net earning (

Operating Expenses (Opex)
• Operating Expenses (‫(المصاريف التشغيلية‬

are costs that are required to keep the
business going day to day.
– e.g. salaries, benefits, insurance costs,
etc..
• Operating Expense shows up on the
income statement and thus reduce
profit

Capital Expenditures (Capex)
• Capital expenditure (‫(المصاريف الرأسمالية‬

is the purchase of an item that’s
considered a long term investment
– E.g. computer system, equipment, car
• Capex shows up on the balance sheet; only

depreciation of a capital equipment appears
on the income statement

• So, operating expenses reduces the
bottom line immediately, and a capital
expenditure spreads the hit out over
several accounting periods

Profit (‫(الربح‬
• “Profit is a sovereign criterion of an
enterprise” Peter Drucker
• Profit is not Cash; beware!
• Profit is an estimate! And you can’t
spend estimates!
• It’s a promise to pay!
• Profit will turn into cash (hopefully!)
Matching principle
• A fundamental accounting rule for
preparing an income statement
• It says “match the sale with its
associated cost to determine profit in
a given time”
• Accountants have to make assumptions
and come up with estimates

The Purpose of the Income Statement
• In principle, it tries to measure whether

the products or services are profitable
when everything is added up.

A sample Income Statment
• Revenue (‫(مبيعات‬ $100
• Cost of Goods Sold (‫(تكلفة المبيعات‬ 50
• Gross Profit (‫(إجمالي الربح‬ 50
• Expenses (‫(مصروفات‬ 30
• Operating Profit (EBIT) 20
• Taxes (‫(ضرائب‬ 5
• Net Profit (‫(صافي الربح‬ $15
Revenue
• Revenue recognition; when to record
or recognize a sale
– When a product delivered; a commonly
used rule.
– Beware: this is an area for accountants
judgment and thus manipulation
– Most common source of accounting fraud;
revenue recognition!

Costs & Expenses
• Cost of Goods Sold (COGS) or Cost
of Services (COS): to measure all
costs directly associated with making
the product of delivering the service
– The material. The labor.

Operating Expenses
• Also referred to as “Overhead” or
“SG&A” i.e. Sales, General, &
administrative expenses
– Utilities, rent, telephone, research,
management, staff salaries, HR,
accounting, IT, and so forth
– Depreciation is included … the way it’s
calculated affects the bottom line

• Revenue $10,000 • Revenue $10,000
• COGS 5,000 • COGS 5,000
• Gross Profit 5,000 • Gross Profit 5,000
• Expenses 3,000 • Expenses 3,000
• Depreciation* 1,000 • Depreciation* 3,000
• Net Profit $1,000 • Net Profit - $1,000
* 3 years depreciation * 1 year depreciation

Forms of Profits
• Profit is the amount left over after
expenses are subtracted from revenue.

3 basic types of profits
Gross Profit (GP) = Sales – COGS
GP can greatly be affected by decisions

about when to recognize revenue and
decisions about what to include in
COGS

Operating Profit, EBIT (‫(الربح من العمليات التشغيلية‬
= Gross Profit – operating expenses
• It’s the profit a business earns from the

business it is in – from operations
• It measures both the overall demand for
the company products (sales) and the
company’s efficiency in delivering those
products (costs)

Net Profit
Net Profit (the bottom line) (‫(صافي الربح‬

= Operating profit – (interest expense +
taxes, any other expenses not included in
operating profit)

How to fix it?
2. Increase profitable Sales ‫زيادة المبيعات‬

‫ذات الربحية‬
1. Find new markets, or
2. new prospects,
3. Work through sales cycles,
4. So on so forth

2. Lower Production Cost and run
more efficiently – i.e. reduce COGS
… ‫تخفيض تكاليف النتاج والعمل بكفاءة أعلى‬
Takes time; you need to study
production processes, find
inefficiencies, and implement changes

3. Cut Operating Expenses (‫تقليص‬
‫(المصروفات التشغيلية‬
which almost always means cut the
headcount! … layoffs! ‫تسريح موظفين‬
Short-term Solution! It makes earning looks
better fast! ‫حل قصير المدى قد تظهر له نتائج سريعة‬
But it backfires! ‫يعطي عكس النتائج المرجوة ولو بعد حين‬

For most companies, it’s better to
manage for the long haul and to focus
on increasing profitable sales and
reducing costs. Sure, operating
expenses may have to be trimmed. But
if that your focus, you’re probably
postponing the day of reckoning!

Balance Sheet ‫بيان المركز المالي‬
Assets = Liabilities + Equity

Understanding Basics
• The balance sheet reflects the assets (‫الصول‬
‫ أو الموجودات‬,(liabilities (‫المطلوبات أو المديونيات‬and ,(
owner equity (‫( حقوق الملك أو المساهمين‬at a point
in time.
• It’s simply a statement of what a business
owns and what it owes at a particular point in
time. The difference represents equity
• All financial statements ultimately flow to the

balance sheet

Equity
• Equity is the shareholders’ stake in the
company.
* Equity = Assets – Liabilities
* Equity = sum of all capital paid in by
shareholders + profits earned – dividend
paid out
• Increasing equity is a company’s goal.
• Profitability & Equity are related

What’s the relationship?
• Profitability is like the grade you receive for a
course
• Equity is like your overall GPA
• Your GPA always reflects your cumulative
performance at one point in time. Any grade
affects it, but doesn’t determine it
• Over time, the equity section of the BS shows
the accumulation of profits or losses

• Balance sheet (like income statement)
in many respects is a work of art not
only a work of calculation; understand
the assumptions, decisions, and
estimates that go into it

Assets
• Assets are what the company owns;
– Cash & Cash Equivalent ‫النقد وما في حكمه‬
– Machinery & equipment ‫مكائن ومعدات‬
– Buildings ‫مباني‬
– Land ‫أرض‬

• Current Assets ‫ الموجودات المتداولة‬:
anything that can be turned into cash in less
than a year
• Long Term Assets ‫ الموجودات طويلة المدى‬:

have a useful life of more than a year

Types of Assets
• Cash & Cash Equivalents
Money in banks & money-markets
• Accounts Receivable (A/R)

– Amounts customers owe the company. It’s
like a loan form the company to its
customers
– Important for managers to watch it closely

• Inventory; ‫المخزون‬
– Finished goods; ready to be sold
– WIP goods; work-in-process
– Raw materials Inventory
• Property, Plant, & Equipment (PPE)

– Includes buildings, land, machinery, trucks, cars,
computers, etc
– Recorded at Purchase price

• Less: accumulated depreciation
– Land doesn’t wear out
• Goodwill ‫الشهرة‬
– Like land; not amortized!
• Intellectual property & other Intangible assets
– Patents, brand names, customer lists, strategic strength,
employees, reputation, and so on.
– Most are not found on the balance sheet unless an acquiring
company pays for them!
• Prepaid asset

Liabilities & Equity
• The other side shows how the assets
were obtained

Liabilities
• Current liabilities ‫ مطلوبات متداولة‬: to be
paid of in less than a year
• Accounts payable ‫ديون مستحقة الدفع للموردين‬
amounts the company owes its vendors
• Long-term liabilities ‫ديون طويلة الجل‬will :
come due over a longer time frame;
mostly loans

Workshop Example
• Pp 102-103

• A change in one statement nearly
always has an impact on the other
statements.
• The effect of Profit on Equity; net profit
adds up to equity unless paid out as
dividend
– See other examples pp 104-105

‫‪Cash Statement‬‬
‫قائمة التدفقات النقدية‬
Why cash?
• It’s cash that keeps a business alive,
and cash flow is a critical measure of its
financial health. You need people to run
the business, you need a place, you
need electricity, telephones, computers,
supplies, etc. you can’t pay for all these
things with profits because profits aren’t
real money. Cash is!

• Profit is different than Cash
• Companies need both Profit & Cash
• Understanding the difference is a key to
increasing your financial intelligence.

1st Scenario:
Profit without Cash
Jan Feb Mar
Sales $20,000 $30,000 $45,000
COGS 12,000 18,000 27,000
Gross 8,000 12,000 18,000

Profit
Expenses 10,000 10,000 10,000
Net Profit $(2,000) $ 2,000 $ 8,000

Jan Feb Mar
Beginning $ 10,000 0 ($22,000)
Cash
Cash in 0 0 20,000
(Collection)
Cash out 0 (12,000) (18,000)
(vendors)
Cash out (10,000) (10,000) (10,000)
(expenses)
Net Cash 0 ($ 22,000) ($ 30,000)

2nd Scenario:
Cash without Profit
Jan Feb Mar
Sales $ 50,000 $ 75,000 $ 95,000
COGS 35,000 52,000 66,500
Gross Profit 15,000 22,500 28,500
Expenses 30,000 30,000 30,000
Net Profit $ (15,000) $ (7,500) $ (1,500)

Jan Feb Mar
Beginning $ 10,000 $ 30,000 $ 75,000

Cash
Collection 50,000 75,000 95,000
(cash sales)
Payment 0 0 (35,000)
(COGS)
Payment (30,000) (30,000) (30,000)
(expenses)
Net Cash $ 30,000 $ 75,000 $ 105,000

• Understanding this foundational
concept opens up a whole window of
opportunity to ask questions and make
smart decisions

The language of Cash Flow
• Cash from or used in operating
activities
• Cash from or used in investing activities
• Cash from or used in financing activities

Ratios
The Power of Ratios
• They offer a quick shortcut to
understanding what the financial
statements are saying
• Ratio indicate the relationship of one
number to another

• Senior managers watch ratios such as gross
margin to be aware of rising costs or
inappropriate discounting
• Lenders examines ratios such as debt-to-
equity to give them an idea of whether the
company will be able to pay back a loan
• Credit managers assess potential customers’
financial health by inspecting the quick ratio

• The power of ratios lies in the fact that
numbers in the financial statements by
themselves don’t reveal the whole story
• Ratios offer points of comparison

• Compare Ratios with themselves over
time (trend analysis)
• Compare Ratios with what was
projected
• Compare Ratios with industry averages

• Is net profit of $ 10 million healthy for a
company?

4 Categories of Ratios
• Profitability Ratios
• Leverage Ratios
• Liquidity Ratios
• Efficiency ratios

Profitability Ratio
• The higher the better
• Evaluate a company’s ability to
generate profits
• Are most of common of ratios

• Gross Profit Margin (or Gross Margin):
= Gross Profit / Revenue
Trend line in gross margin is important as it

indicates potential problem. If it is heading
down it means that the company is under
sever price pressure or its raw material and
labor are rising or both

• Operating Profit Margin (Operating
Margin)
= Operating Profit (EBIT) / Revenue
A key metric indicating how well

managers as a group are doing

• Net Profit Margin (net margin)
= net profit / revenue
To be compared with the company

performance in the previous years & to
similar companies in the same industry

• Return on Asset (ROA)
= net profit / total assets
ROA tells what percentage of every

dollar invested in the business was
returned to you as a profit. It shows
how effective the company is at
using those assets to generate profit

• An ROA considerably above industry average
norm may indicate that the company is not
renewing its asset base for the future – not
investing in new machinery and equipment ---
its long term prospect will be compromised
• Another possibility is that the company
executives are playing fast and loose with the
balance sheet, using accounting tricks o
reduce the asset base to make ROA look
better

• Return on Equity (ROE)
= net profit / shareholders’ equity
It tells us what percentage of profit we

make for every dollar of equity invested

Leverage Ratios
• ‘Leverage’ is the financial analyst’s word for
‘debt’. Two kinds of leverage:
• Operating leverage: the ratio between fixed
costs and variable costs. Increasing operating
leverage means adding to fixed costs with the
objective of reducing variable costs
• Financial Leverage: the extent to which a
company’s asset based is financed by debt

• Debt-to-Equity Ratio:
= Total Liability / Shareholders’ equity

• Interest Coverage
= Operating Profit / annual interest charges
The ratio shows how easy it will be for the

company to pay its interest.

• What happens when either of these two
ratios heads too far in the wrong
direction (i.e. too high Debt-To-Equity
and too low Interest Coverage)?

Liquidity Ratios
• Current Ratio
measures the company’s current assets

against its current liabilities
Current Assets
= ________________
Current Liabilities

• Quick Ratio
known as the “Acid Ratio”
Current Assets - Inventory

= __________________
Current Liabilities

Efficiency Ratios
(making the most of your assets)
• Efficiency ratios help you evaluate how

efficiently you manage certain key
balance sheet assets and liabilities
• For instance, if you can reduce
inventory and speed up collection of
receivable, you will have a direct and
immediate impact on your company’s
cash position

Invent ory D ays and
Turnov er
• Days-in-inventory (DII)
Average Inventory
= ____________________
COGS/360days

• Inventory Turns
360
= _______________
DII

• Days Sales Outstanding (DSO)
known as “Average Collection period” and/or “Receivable Days”
• It is a measure of the average time it takes to collect the cash

from sales (or it measures how fast customers pay their bills)
Ending A/R
= ________________
Revenue / 360 days

• DSO is a key ratio for those doing a due
diligence on a potential acquisition.
• High DSO may be a red flag
• Due diligence folks need to look at the
aging of receivables, how old specific
invoices are & how many there are

• Days Payable Outstanding (DPO)
it shows the average number of days it takes a
company to pay its own outstanding invoices
Ending A/P
= ___________________
COGS / 360 days

• Property, Plant, & Equipment (PPE)
Turnover
It tells how many dollars of sales the company is getting for
each dollar invested in PPE. It measures how efficient you’re in
generating revenue from fixed assets.
Revenue
= __________________
PPE

• Total Asset Turnover
It compares revenue to total assets not just fixed assets.
= _______________
Revenue
Total Assets

Which Ratios are most
important to your Business?
• Depends on the industry, competition,
and company specific circumstances
• Example: Retailers watch Inventory
turnover

Two things …
• The power of percent-of-sales figures

to be tracked over time to establish
trend lines
• Each line item of the income statement
can be expressed as a percent of sales
• The percent-of-sales figure gives a
manager more info than the raw
numbers alone
Ratios Relationships
• Example:
ROA (Return on Assets)= Net income/ total assets

• Expressed differently:
ROA= net income/revenue * revenue/assets

= net profit margin * asset turnover

Return on Investment
Fundamentals
• Time Value of Money simply says ‘a
dollar in your hand today is worth more
than a dollar your expect in the future’
• Simply because of the risk involved.
You may not collect it tomorrow.
• The longer time period, the higher the
risk, the larger the interest charges are
likely to be
• Three key concepts when analyze
capital investment:
1) Present Value,
2) Future value,
3) required rate of return (or hurdle rate)

• Financial analyst figure a company’s
Cost of Capital by
2. finding out the expected cost of its
debt (interest rate),
3. estimating the return expected by the
shareholders, and
4. taking a weighted average of the two.

• Example:
A company borrow at 4%, Shareholder

expect a 16% return. It’s financed 25%
by debt and 75% by equity.
What’s the cost of capital?

Figuring ROI
• Capital expenditures, Cap-ex, Capital
Investments, Capital Budgeting, ROI …
companies use these terms loosely or
interchangeably to mean ..
• The process of deciding what capital
investments to make to improve the
value of the company.

The process of calculating
ROI
1. Determine the initial cash outlay
2. Project the future cash flows
generated from the investment
3. Evaluate the future cash flows;
typically using 3 different financial
methods; payback, NPV, IRR.

Learning the threee methods
• Payback Method:
It measures the time required for the

cash flow form a project to return the
original investment
Initial Investment
= ___________________
Yearly cash flow

Payback Method
On the Plus side:
• It’s simple to calculate ad explain.
• It provides easy and quick reality check.
If the payback period is longer than he
project life, then no need to look any
further
• It’s a project used in meetings to quickly
determine if a project is worth exploring.

Payback Method
On the minus side:
• It doesn't tell you much.
• It doesn’t consider the cash generated
beyond the breakeven
• It doesn’t give you an overall return
• It doesn’t consider the time value of
money

Payback - Conclusion
• Payback method should be used to
compare projects (those will recover
their initial investment or reject projects
(those that will never recover their initial
investment)
• So, if payback looks promising, go on to
the next method to see if the investment
is really worth making

Net Present value (NPV)
Net Present value (NPV):
It’s called Discounted Cash Flow (DCF) method
Pros:
It takes into account the time value of money
It considers business cost of capital or other hurdle rate
It provides answer in today’s dollars

NPV – Acceptance Criterion
• If NPV of a project is greater than zero,

it should be accepted because the
return is greater than the company’s
hurdle rate.

Internal Rate of Return (IRR)
• IRR calculates the actual return

provided by the projected cash flows.
• That rate of return can then be
compared with the company’s hurdle
rate to see if the investment passes the
test
• It can be looked at as the hurdle rate
that makes NPV equals to Zero
IRR – cons
• IRR doesn’t address the issue of scale.
• Example:
an IRR of 20% doesn’t tell anything

about the dollar size of the return

IRR – Acceptance Criterion

• Example:
Initial Investment: $ 3,000

Cash flow by yearend: $ 1,300
Duration: 3 years

Comparing the Three methods
• Example:
A company has $ 3,000 to invest, its hurdle rate is

9%, has three investments of the same risk level
– Investment A: returns cash flow of $1000 per year for 3 years
– Investment B: returns cash flow of $3600 at the end of year one
– Investment C: returns cash flow of $4000 at the end of year 3
If you could select one of these investment, which would it be?

1. Payback method
• A: PB=3 years
• B: PB=1 year
• C: PB=3years
• NPV method
• A: NPV= -$469
• B: NPV= +$303
• C: NPV=+$552
• IRR method
• A: IRR= 0 %
• B: IRR= 20%
• C: IRR= 15%

• What’s the right decision?
if we go by IRR, B will be chosen.

However, C has a higher NPV, which
shows that C is worth more in today’s
dollar than B.
With C, we get a lower return but we get
it for three years at 15%, which is better
than one year at 20%.
• An important step: revisit the cash flow
estimates, make sensitivity analysis to
check, for instance, the calculations
using future cash flows that are 80% of
original projections, and see if the
investment still makes sense.

• Although the process entails a lot of
calculating, you would be surprised how
intuitive the whole process can be

A Story
John was running a financial review
meeting for XYZ. A senior manager in a
company suggested to invest $80,000
in a new machine center that could
produce certain parts in-house rather
than relying on an outsider. Before John
could speak up, a shop floor technician
asked the manager the following
questions:

• Did you figure out the monthly cash flow
return we will get on this new
investment? $ 80,000 is a lot of money!
• Do you realize that we are in the spring,
and the business is typically slow, and
cash is tight during the summer?

• Have you figured in the cost of labor to
run the machine? We are all pretty busy
in the sop; you will probably have to hire
someone to run this machine
• And are there better ways we could
spend that cash to grow the business?

Working Capital
Managing the Working Capital
• Learn to manage working capital better

to impact the company’s profitability and
cash position
• Working Capital =
Current Assets – Current Liability

• Elements of Working Capital
– Cash to buy Raw material to make goods
(inventory) to sell (AR) which t be collected
(Cash)

Cash Conversion Cycle
• it’s the timeline relating the production
to the company’s investment in working
capital
• How many days all this takes? How
many days a company’s cash is tied
up?

• Cash Conversion Cycle
= DSO + DII – DPO

This tells how fast a company recovers
its cash, from the moment it pays its
payable to the moment it collects its
receivable

• The Cash Conversion Cycle gives you a
way of calculating how much cash it
takes to finance the business: you just
take sales per day and multiply it by the
number of days in the cash conversion
cycle

• Example:
DSO = 54 days,
DII= 74 days,
DPO= 55 days
Sales per day = $ 241,360
How much working Capital this business
would require to finance its operations?

• CCC = 54 + 74 – 55 = 73 days
• 73 days * 241,360 Sales/day
= 17,619,280

Financial Literacy
• By introducing these concepts, it’s
aimed to increase your financial
intelligence and helping you becoming
a better manager.
• By understanding financial aspects of
the business, we believe you will make
more effective decision in your business
and in your whole life

• There’s a simple antidote to politics;
sunlight, transparency, and open
communication
• When people understand a company’s
objectives and work to attain them, it’s
easier to create an organization built on
a sense of trust and a feeling of
community

Understanding Financial Reports - Basic Course

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Financial Intelligence

Aiming to become Financially Intelligent person – Ayman El-Najjar

• Everyone in a company does better

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

• Understanding the foundation

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

• Accounting and Finance, like all other

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Examples of the art of Finance Simple but critical Questions:

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

• In June, you worked on a new product

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Each method entails a whole passel of

Aiming to become Financially Intelligent person – Ayman El-Najjar

• To understand what the numbers really

Aiming to become Financially Intelligent person – Ayman El-Najjar

For the company:

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

• We know “What’s Financial Intelligence?”

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

• Operating Expenses (‫(المصاريف التشغيلية‬

Aiming to become Financially Intelligent person – Ayman El-Najjar

• Capital expenditure (‫(المصاريف الرأسمالية‬

• Capex shows up on the balance sheet; only

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

• In principle, it tries to measure whether

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

* 3 years depreciation * 1 year depreciation

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

GP can greatly be affected by decisions

Aiming to become Financially Intelligent person – Ayman El-Najjar

• It’s the profit a business earns from the

Aiming to become Financially Intelligent person – Ayman El-Najjar

Net Profit (the bottom line) (‫(صافي الربح‬

Aiming to become Financially Intelligent person – Ayman El-Najjar

2. Increase profitable Sales ‫زيادة المبيعات‬

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Assets = Liabilities + Equity

• All financial statements ultimately flow to the

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar

Aiming to become Financially Intelligent person – Ayman El-Najjar