Overview

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.

Disclaimers

Help and Office

Materials

Attendance

Grading

Schedule

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

Growth metrics

Market share

Modeling revenues

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

Raising equity

Sweat equity and incentive structures

Session 9: An integrated view — The Six Pack Framework

The six key value drivers

Size

Growth

Margins

Net operating asset intensity

Business risk

Financial risk