Financial intelligence Training

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  • learn how to deal with your emotions. (Don’t invest in the financial market when the market is moving up and don’t sell when the market is moving down )
    When you are making financial decisions you are using numbers and financial information?





  • It is not about knowledge but rather using and applying the knowledge on real life situations
    if you don’t know the asnwer


  • Are you good with numbers
  • Are you good with numbers

  • Stock broker understand numbers


  • Are you good with numbers
  • How to deal with financial information

  • How to deal with financial information
    Market Capitalization
    Future Cash Flow
  • that more information is always better. But I describe lots of cases in "Blink" where that simply isn't true. There's a wonderful phrase in psychology--"the power of thin slicing"--which says that as human beings we are capable of making sense of situations based on the thinnest slice of experience. (3 to 5)
    You need to have the ability to eliminate any irrelevant items rather than focusing on more items.




  • This is not real profit
  • Many managers think that income statement shows how much the cash the company earned during the period
    How much they spend and how much left over. And the left over amount will be the profit / No

    Income statement focuses on revenue and expenses and profit
    Accural Accounting method


  • Profit is not cash
  • Are you good with numbers

  • Profit is not cash
  • When you make decisions you should look at the Assumptions What are they (what to include and what not to include) – estimates how they are implemented – Bias of the implemeation– implications of the implemattion

  • Are you good with numbers





  • Playing with expenses














  • Do you follow your feelings when you make financial decisions or just the numbers?
    You may feel that something is not right but the numbers are not telling you that.
    Do you follow your intuition?
    describe emotional reactions, gut feelings--thoughts and impressions that don't seem entirely rational.
    snap judgments
    Trust yourself and your ability to make right decisions
    that more information is always better. But I describe lots of cases in "Blink" where that simply isn't true. There's a wonderful phrase in psychology--"the power of thin slicing"--which says that as human beings we are capable of making sense of situations based on the thinnest slice of experience. (3 to 5)
    You need to have the ability to eliminate any irrelevant items rather than focusing on more items.
    don’t always look at the numbers (marrage but really look at the big pitcure and follow you feelings) don’t frorce yourself to think
  • Do you follow your feelings when you make financial decisions or just the numbers?
    You may feel that something is not right but the numbers are not telling you that.
    Do you follow your intuition?
    describe emotional reactions, gut feelings--thoughts and impressions that don't seem entirely rational.
    snap judgments
    Trust yourself and your ability to make right decisions
    that more information is always better. But I describe lots of cases in "Blink" where that simply isn't true. There's a wonderful phrase in psychology--"the power of thin slicing"--which says that as human beings we are capable of making sense of situations based on the thinnest slice of experience. (3 to 5)
    You need to have the ability to eliminate any irrelevant items rather than focusing on more items.
    don’t always look at the numbers (marrage but really look at the big pitcure and follow you feelings) don’t frorce yourself to think

  • Do you follow your feelings when you make financial decisions or just the numbers?
    You may feel that something is not right but the numbers are not telling you that.
    Do you follow your intuition?
    describe emotional reactions, gut feelings--thoughts and impressions that don't seem entirely rational.
    snap judgments
    Trust yourself and your ability to make right decisions
    that more information is always better. But I describe lots of cases in "Blink" where that simply isn't true. There's a wonderful phrase in psychology--"the power of thin slicing"--which says that as human beings we are capable of making sense of situations based on the thinnest slice of experience. (3 to 5)
    You need to have the ability to eliminate any irrelevant items rather than focusing on more items.
    don’t always look at the numbers (marrage but really look at the big pitcure and follow you feelings) don’t frorce yourself to think
  • Do you follow your feelings when you make financial decisions or just the numbers?
    You may feel that something is not right but the numbers are not telling you that.
    Do you follow your intuition?
    describe emotional reactions, gut feelings--thoughts and impressions that don't seem entirely rational.
    snap judgments
    Trust yourself and your ability to make right decisions
    that more information is always better. But I describe lots of cases in "Blink" where that simply isn't true. There's a wonderful phrase in psychology--"the power of thin slicing"--which says that as human beings we are capable of making sense of situations based on the thinnest slice of experience. (3 to 5)
    You need to have the ability to eliminate any irrelevant items rather than focusing on more items.
    don’t always look at the numbers (marrage but really look at the big pitcure and follow you feelings) don’t frorce yourself to think

  • Financial intelligence Training

    1. 1. Financial Intelligence Knowing what the numbers really mean Iyad Mourtada, CMA, CIA, CFE 1
    2. 2. 2
    3. 3. Why  do  smart  managers   make  bad  1inancial   decisions? 3
    4. 4. Financial Intelligence Emotional Intelligence 4
    5. 5. Neuron (nerve cell) is an electrically excitable cell that processes and transmits information by electrical and chemical signaling. Obtain Process Store Connect 5
    6. 6. Financial Information Gross Margin = 22% Operating Margin = 7.5% Net Margin = 2.8% Financial Financial Knowledge Numbers 6
    7. 7. The Continuum of Understanding Know (Cleveland 1982) Why Know How Know What Know nothing 7
    8. 8. ALLOCATION OF MENTAL SPACE 8
    9. 9. “I was very creative with my accounting, but not creative enough.” Finance is an Art 9
    10. 10. Financial Numbers 10
    11. 11. A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost? X:bat X + Y = 1.10 1 + Y + Y = 1.10 Y:ball X-Y =1 Y = 0.05 11
    12. 12. A person's inability to make sense of the numbers. Do you know how to deal with numbers? 12
    13. 13. 200 400 100 Customers 200 800 400 100 Potential Customers 13
    14. 14. $ Millions 132 131 130 129 01/2010 03/2010 14
    15. 15. Look at the big picture $ Millions 140 120 100 80 01/2009 01/10 03/10 15
    16. 16. Numbers tell a Story 16
    17. 17. Financial Information 17
    18. 18. Figuring out how much a company worth Share Price X # of Shares Present Value of Future Cash Flow 18
    19. 19. 19
    20. 20. Having more information is not always better 20
    21. 21. Turning Financial Information into Financial Knowledge 21
    22. 22. A company has more cash today when: A. Accounts receivable increases. B. Profit increases. C. Customers pay their bills sooner. D. Retained earnings increases. 22
    23. 23. Income Statement - How do you account for any expenses and revenues? - Who decides how you should account for any expenses and revenues? The management! - How do they know? They don’t! They guess. Lots of accounting decisions are just that – guesses. 23
    24. 24. Profit is an Estimate 24
    25. 25. - Accountants had to make judgments decisions when they record financial transaction - Financial managers need to make objective decisions based on these numbers that they get from accountants 25
    26. 26. Accountants should give the most accurate picture of the company's performance. (read footnotes) - All financial decisions are based on judgment. - Different methods produce different results. 26
    27. 27. Don’t trust the numbers 27
    28. 28. It is very important that you ask questions about the numbers to make sure that they are what you think they are. 28
    29. 29. - There is always accounting judgment involved and that can lead to manipulation - Manipulation can benefit the company (It is not illegal) 29
    30. 30. - Accounting change that is material to the bottom line should be footnoted but who decide what is material and what isn’t? Accountants - GAAP only provide guidelines 30
    31. 31. Are the accountants making the right judgment decisions? Questions: Who control your organization? 31
    32. 32. 32
    33. 33. Cooking the Financial Books Assumptions (What ingredients to include) Estimates (How much to include) You may assume that they’re accurate down to the last dollar. Not true! The balance in the cash account is exact, but virtually every other number you see in a financial report is based on an estimate. 33
    34. 34. Increase Revenue (Revenue Recognition) 34
    35. 35. - Sold equipments on four-year leases, including service and maintenance. - Booked all the revenues up front. - Xerox mis-stated four years' worth of profits, resulting in an overstatement of close to $6bn. 35
    36. 36. Channel Stuffing Company inflates sales figures by forcing more products through a distribution channel than the channel is capable of selling to the world at large. 36
    37. 37. Reduce Expenses (Matching Principle) 37
    38. 38. Income Statement 38
    39. 39. - Grow rapidly by buying other garbage companies. But didn't know to run them. - Changed the depreciation of their 20,000 tracks from 8-10 years to 12-15 years and did the same for their 1.5 million dumpsters - Took a pretax charge -a one- time write off- of 3.54 billion against its earnings 39
    40. 40. Which is more important? A. How much you make B. How much you keep C. How much you borrow D. How much you spend Net Profit 40
    41. 41. 41
    42. 42. Balance Sheet 42
    43. 43. Underreporting ‘line costs’ (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them. In June 2002, the company admitted it had inflated its profits by $3.8bn between January 2001 and March 2002. By the end of 2003, it was estimated that the company's total assets had been inflated by around $11 billion 43
    44. 44. Goodwill Goodwill = Price paid - net assets (Assets - Liability) Goodwill = $6 - (5 - 2) = 3 Goodwill could be amortized over a maximum of forty years or the estimated useful life of the acquired business. 44
    45. 45. !"#$%&'()#*(&+,(&*-.+&/*0-"+#$+&#..(+& 45
    46. 46. Brand value accounts for approximately %30 of the market capitalization of the S&P 500 (Millward Brown Optimor, 2007). 46
    47. 47. - Bought 600 companies in 2000 and 2001 (undervalued the assets and increase the goodwill) = Higher profit - Tyco suffered more than a $9 billion loss in 2002, which included the asset impairment write-down by over $3 billion, losses of nearly $2 billion for the two restructuring charges, and over $1 billion from the two goodwill impairment charges. In all, the net charges totaled nearly $7 billion of the loss that year. 47
    48. 48. If you own more than 50% of a company it must be consolidated on the parent company balance sheet, but if you own less than 50%, it typically stays off the balance sheet as an unconsolidated affiliate. Enron established partnerships that enabled them to move some of their debt into affiliate companies that should have been independent but weren't. Ultimately, the partnerships were doing the borrowing, which protected Enron's credit ratings. 48
    49. 49. Cash is King Warren Buffett 49
    50. 50. Profit = Cash Profit will be turned into cash Profit without cash Cash without profit Cash Flow Statement: - Cash In - Cash Out 50
    51. 51. !""# !""$ Cash Flow %&'()*+,-./0/)12)34'0/)5,+6)780+&9.:;)<=9.-.9.0' Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 465,000 $ 272,000 Adjustments to reconcile net income to net cash provided Statement: by operating activities Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479,000 300,000 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317,000 69,000 Gain on sale of property and equipment . . . . . . . . . . . . . . . . . . . . . (28,000) (59,000) Changes in operating assets and liabilities Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,000) (64,000) Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,000) 129,000 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 32,000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000 22,000 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,000 (110,000) Net cash provided by operating activities . . . . . . . . . . . . 1,328,000 591,000 %&'()*+,-./0/)12)34'0/)5,+6)>:-0'9.:;)<=9.-.9.0' Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . ...... (1,010,000) (1,430,000) Proceeds from disposal of property and equipment . . . . . . . . . . . . 38,000 7,000 Purchase of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,000) — Net cash used for investing activities . . . . . . . . . . . . . . . . . (994,000) (1,423,000) %&'()*+,-./0/)12)34'0/)5,+6)?.:&:=.:;)<=9.-.9.0' Additional long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,000 863,000 Retirement of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (322,000) (560,000) Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 68,000 466,000 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (18,000) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154,000) (133,000) Net cash provided by (used for) nancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (271,000) 618,000 Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . 63,000 (214,000) %&'()&:/)=&'()0@A.-&B0:9'C)10;.::.:;),5)20&+ ................ 314,000 528,000 %&'()&:/)=&'()0@A.-&B0:9'C)0:/),5)20&+ ........................ $ 377,000 $ 314,000 51
    52. 52. Jack is looking at Anne, but Anne is looking at George. Jack is married, but George is not. Is a married person looking at an unmarried person? A. Yes B. No C. Cannot be determined Jack Anne George Married Unmarried 52
    53. 53. P r o f e s s i o n a l s ,   w h o   h a ve   knowledge   and   experience,   may   think   they   can   make   decisions   without   really   using   their   minds.   They   don’t   expect   new  things  and  they  miss  them.   They   look   at   the   details   and   forget  the  big  picture. 53
    54. 54. While you might not have all the answers, you should know what questions to ask. 54
    55. 55. Strategic Financial Decisions 55
    56. 56. www.openthinkingacademy.com 56

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