Seeing the Big Picture: Business Acumen to Build Your Credibility, Career, and Company
by Kevin Cope
The premise of this book is that an employee who understands business fundamentals will be taken more seriously by management. “If, through your questions, ideas, comments, analysis, proposals, and performance, you exhibit business acumen, you will be seen as a more valuable contributor. You will demonstrate your worth to the company, and other people will notice.”
Part One introduces the five key drivers of any business:
- Cash: “Without strong cash flow, a company will quickly die.”
- Profit: This chapter covers accrual-based accounting, gross margin, and net income.
- Assets (tangible and intangible): The author explains asset strength (liquidity) and asset utilization (productivity). “The purpose of assets is to be put to use to generate revenue, a return on the asset.”
- Growth: “Your CEO’s most important job is to ensure sustainable, profitable growth in order to create value for owners/shareholders.” The pros and cons of organic and inorganic growth are discussed.
- People (customers and employees): “The cost of getting a new customer is two to ten times more than the cost of keeping an existing customer, so you really want to keep the customers you have.” This chapter also explains the concept of internal customers. “When you talk with people in other departments, look at the issue or topic at hand from their perspective and from their functional responsibility. One of the most important applications of business acumen is communicating with colleagues from other departments on the basis of what’s important to them.”
Part Two explains how to read a company’s annual report and three key financial statements: the income statement, the balance sheet, and the statement of cash flows. “When analyzing numbers on the financial statements, you should review four basic characteristics:
- Amount
- Trend
- Ratio (the amount compared to other numbers)
- Comparison to competitors and/or industry”
Cash from operating activities “is the most important number on the statement of cash flows… The most important ratio to analyze here is the amount of cash flow generated from operating activities compared to profit (net income) for the same period… we would divide the cash from operations by the net income… You generally want this ratio to exceed 1.0, meaning you want cash flow to be greater than profit. Why? Because it reflects a company’s ability to effectively turn profits into cash.”
Throughout the book, a fictitious business called Austin’s Cycle Shop is used to illustrate various business circumstances and demonstrate financial calculations. The author also includes averages from the S&P 500 as benchmarks for several metrics he discusses.
Cope, Kevin. Seeing the Big Picture: Business Acumen to Build Your Credibility, Career, and Company. Austin, Texas: Greenleaf Book Group Press, 2012. Buy from Amazon.com
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The Key Point 