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Financial Intelligence in Corporate Finance - Coggle Diagram
Financial Intelligence
in Corporate Finance
Understanding
the Numbers
Definition
: interpreting financial data to comprehend
a company's performance and make informed decisions
Examples
: Analysing financial statements,
ratio analysis
The Art of Finance
(and Why it Matters)
Definition
: Recognizing that finance is not just about the
numbers but also about interpretation, estimation, and judgment (the rules accountants follow and why you don't always have to)
Examples
: Adjusting financial reports for better decision-making, understanding the impact of finance on business strategy
Financing and Investing
Decisions
Definition
: Balancing decisions on how to finance the business (through debt or equity) and where to invest resources for optimal growth and return
Examples
: Debt vs. equity analysis, capital budgeting, investment risk assessment
Profit ≠ Cash
and you need both
Definition
: Understanding that profit figures are subject
to interpretation and manipulation, whereas
cash flow is more concrete (cash is king)
Examples
: Cash flow management, distinguishing
between cash basis and accrual accounting.
Income Statements
Definition
: Looking at a company's revenues and expenses to determine its profitability over a period of time
Examples
: Revenue recognition, cost of goods sold, operating expenses
Balance Sheets
Definition
: Knowing what the company owns (assets) and owes (liabilities) and the implications for financial health
Examples
: Balance sheet analysis, asset
management, shareholder's equity
Cash Flow Statements
Definition
: Analyzing how changes in balance sheet accounts and income affect cash and cash equivalents
Examples
: Operating, investing, and financing cash flows
Ratios and Other Analytics
Learning what the numbers
are really telling you
Definition
: Using ratios to compare relationships between financial statement accounts or categories to analyze company strengths and weaknesses
Examples
: Liquidity ratios, profitability ratios,
leverage ratios
The Time Value
of Money
Definition
: The concept that money available now
is worth more than the same amount in the
future due to its earning capacity
Examples
: Net present value, internal rate of return
The People Factor
Definition
: Considering human factors in financial decision-making; recognizing that behind every number there is a human action
Examples
: Impact of employee actions on financial results, training employees to understand how their actions affect company finances