Financial Intelligence Quotes

“First, he evaluates a business on its long-term rather than its short-term prospects. Second, he always looks for businesses he understands. (This led him to avoid many Internet-related investments.) And third, when he examines financial statements, he places the greatest emphasis on a measure of cash flow that he calls owner earnings.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“It might surprise you to know that, for the most part, finance involves addition and subtraction. When finance people get really fancy, they multiply and divide. We never have to take the second derivative of a function or determine the area under a curve (sorry, engineers). So have no fear: the math is easy. And calculators are cheap. You don't need to be a rocket scientist to be financially intelligent.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Profit is the amount left over after expenses are subtracted from revenue. There are three basic types of profit: gross profit, operating profit, and net profit. Each one is determined by subtracting certain categories of expenses from revenue.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“gross margin,” “operating income,” “net profit,” and “earnings per share.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“one-time charges, which are also known as extraordinary items, write-offs, write-downs, or restructuring charges.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“one-time charges, which are also known as extraordinary items,”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Amortization is the same basic idea as depreciation, but it applies to intangible assets.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Operating expenses are often thought of and referred to as “overhead”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Some companies refer to operating expenses as sales, general, and administrative expenses (SG&A, or just G&A),”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Above that line on the income statement, typically, are sales and COGS or COS. Below the line are operating expenses, interest, and taxes. What’s the difference? Items listed above the line tend to vary more (in the short term) than many of those below the line, and so tend to get more managerial attention.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Cost of goods sold or cost of services is one category of expenses. It includes all the costs directly involved in producing a product or delivering a service.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“revenue should be recognized when (and only when) it is actually earned. Deferred revenue is money that has come in but is as yet unearned. So it can’t go into the income statement. Instead, accountants put deferred revenue on the balance sheet as a liability—that is, an amount that the company owes to somebody else.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“A falling backlog might indicate declining sales or greater production capacity. One metric that can help you figure out what’s going on is the company’s assessment of how much of the backlog will convert to sales in a given period of time.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“revenue must have been earned. A products company must have shipped the product.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“A company can record or recognize a sale when it delivers a product or service to a customer.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“many numbers on the income statement reflect estimates and assumptions. Accountants have decided to include some transactions here and not there. They have decided to estimate one way and not another.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“a company is making a profit in any given time period doesn’t mean it will have the cash to pay its bills. Profit is always an estimate—and you can’t spend estimates.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“In principle, the income statement tries to measure whether the products or services that a company provides are profitable when everything is added up.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“an income statement measures something quite different from cash in the door, cash out the door, and cash left over. It measures sales or revenues, costs or expenses, and profit or income.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“income statement is supposed to show a company’s profit for a given period—usually a month, a quarter, or a year.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Cash as presented on the balance sheet means the money a company has in the bank,”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Profit is based on revenue. Revenue, remember, is recognized when a product or service is delivered, not when the bill is paid.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Most capital investments other than land are depreciated.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“An accrual is the portion of a revenue or expense item that is recorded in a particular time span.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“any purchase over a certain dollar amount counts as a capital expenditure, while anything less is an operating expense. Operating expenses show up on the income statement, and thus reduce profit. Capital expenditures show up on the balance sheet; only the depreciation of a piece of capital equipment appears on the income statement.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“capital expenditure is the purchase of an item that’s considered a long-term investment, such as computer systems and equipment.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“capital expenditure is the purchase of an item that’s considered a long-term investment,”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Operating expenses are listed on the income statement and are subtracted from revenue to determine profit.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Operating expenses are the costs required to keep the business going from day to day.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean

“Controller. The focus of the controller—sometimes spelled comptroller—is purely internal. His or her job is providing reliable and accurate financial reports. The controller is responsible for general accounting, financial reporting, business analysis, financial planning, asset management, and internal controls. He or she ensures that day-to-day transactions are recorded accurately and correctly. Without good, consistent data from the controller, the CFO and the treasurer can’t do their jobs. The controller is sometimes called a bean counter. It’s wise to use this term correctly; some CFOs and treasurers get annoyed when it is used to describe them, as they do not consider themselves bean counters but financial professionals.”
― Karen Berman, Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean