Managing Money Flows and Building Business Plans [COR1-GB.2206.50]


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This core course will explain the financial language used in businesses and discuss the pros and cons of financial metrics used to evaluate the feasibility and success of businesses. The course will use real cases to explain how the choice of business strategy and its execution is reflected in financial statements. It will also teach you how to build business budgets and plans.


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The list of topics covered are provided below.

Session 1: Introduction to the financial statements

Financial reports

The financial reporting system

Linkages between the financial statements: Stocks versus flows

Session 2: Cash flows versus wealth flows — Revenues versus receipts

Permanent differences: Financing receipts that are never revenues

Temporary differences: Receipts that differ in timing from revenues

Session 3: Cash flows versus wealth flows — Expenses versus payments

Permanent differences: Financing payments that are never expenses

Permanent differences: Payments that differ in timing from expenses

Session 4: Size and growth — Revenue and its drivers

Fashion and tech industry revenue metrics

  1. Software service and product based
    1. Number of paying customers or subscribers
    2. Average revenue per user
    3. Customer retention rate
  2. Advertising based
    1. Number of active users
    2. Page views, time spent per visit, price per click, number of clicks
    3. Number of advertisers
    4. Average revenue per user
  3. Consulting based
    1. Revenue per employee: Billable hours per employee, Price per billable hour
    2. Commission rate
  4. Product or location based
    1. Sales per square foot
    2. “Same store” growth: This definition can be modified to mean “same product growth”
    3. Ramp up rate

Growth metrics

  1. Compounded annual growth rate, Year-over-year growth, Quarter-over-quarter growth
  2. Product life cycles: Diffusion and the S-curve
  3. Organic growth versus acquisitive growth
  4. Constant currency growth

Market share

  1. Network effects
  2. Switching costs
  3. Dominant brand positioning
  4. Experience effects
  5. Economies of scale
  6. Economies of scope

Modeling revenues

  1. Identifying key revenue drivers
  2. Forecasting key revenue drivers
  3. Tying forecasts of revenue drivers to top-line revenue number

Session 5: Margins — Expense drivers

Cost behavior

Operating expense ratios and margins

Revisiting interaction with size

Modeling expenses

Session 6: How prepayments require financing and payables mitigate the need for financing

Modeling prepayments: Operating assets

Modeling payables: Operating liabilities

Session 7: How receivables increase the need for financing and deferred revenues provide financing

Modeling receivables: Operating assets

Modeling deferred revenues: Operating liabilities


Session 8: Meeting financing needs with debt and equity

Raising debt

  1. Assessing borrowing capacity: debt/EBIT ratio, EBIT/Interest expense ratio, debt/value ratio
  2. Understanding corporate loans using personal finance examples
    1. Secured versus unsecured
    2. Private versus public
    3. Fixed versus floating
    4. Long term versus short term
  3. Vendor financing and leasing

Raising equity

  1. Common shares
  2. Preferred shares
  3. Convertible preferred shares

Sweat equity and incentive structures

  1. Share-based compensation

Session 9: An integrated view — The Six Pack Framework

The six key value drivers




Net operating asset intensity

Business risk

Financial risk