FINANCIAL MANAGEMENT PRE-TEST
Do you know?
SECTION 1: Fill in the blanks.
The only way to be secure in business is to ___________ and ____________. Everything else is just a means to that end.
The one report you really need, the one report you cannot do without is ___________.
The only two indisputable facts in any set of financials are ___________ and ___________.
A ___________ is a license to spend. A ___________ is your roadmap to profitability.
______________ is the most important number in business operations – you must know this number for your business.
No wise pilot, whatever the level of talent or experience, neglects to ____________.
The one thing you can never afford in business is _____________________.
SECTION 2: Be honest with yourself. Ask yourself these questions.
How much cash are you generating? Do you have enough cash to do what you need to do, when you need to do it? Do you have an adequate cash reserve to meet unforeseen contingencies and to take advantage of opportunities that present themselves?
Are you getting a Direct Cash Flow Statement and using it to your advantage in your decision making? Do you know what a direct cash flow statement is and how it differs from an indirect cash flow statement?
Do you know how to separate facts from opinions, estimates and assumptions in your financial statements? Some numbers lie. They will lead you astray. Do you know which numbers you can trust to guide you moving forward?
Do you know the difference between a budget and a forecasted projection; and how using a budget can lead you into trouble? Do you use a budget? Is it helping you? Do you create forecasts and project your financial statements?
(Worth noting: a budget looks at the past; a forecast helps you see what’s coming your way.)
Do you know how to calculate your gross profit margin ratio and how to use it in making operational decisions? Are you making decisions based on price, cost or value? How do you decide what you can, and cannot, afford? And, how do you decide when you can afford it?
Do you have a checklist that not only tells you what to do, but when to do it? Do you find yourself continually having to solve one problem after another? Are you able to avoid problems instead of having to solve them? Do you find yourself overlooking critical things that must be done? Are you missing critical deadlines?
Are you confident that if you keep doing what you are doing, you will achieve the outcomes you desire? What changes do you need to make to move forward?
If you don’t know the answers to these questions the odds are overwhelmingly against you that you are guessing about what you need to do, struggling to get ahead and inviting unwanted problems.
Answers to questions 1-7:
1. The only way to be secure in business is to MAKE MONEY and GENERATE CASH. Everything else is just a means to that end.
2. The one report you really need, the one report you cannot do without is THE DIRECT CASH FLOW STATEMENT.
3. The only two indisputable facts in any set of financials are YOUR CASH and DEBT BALANCES.
4. A BUDGET is a license to spend. A FORECAST is your roadmap to profitability.
5. GROSS PROFIT MARGIN RATIO is the most important number in business operations – you must know this number for your business.
6. No wise pilot, whatever the level of talent or experience, neglects to USE A CHECKLIST.
7. The one thing you can never afford in business is TO FOOL YOURSELF.
Numbers are the language of business - they tell a story - your story. Your numbers are always talking to you. If you listen to them - they will tell you what to do. (Note: you can’t run a business by the numbers alone; there’s more to it than that - however, you cannot run a business without them. Financial decisions affect every aspect of your business.) But there is a danger you should be aware of - some numbers lie. It’s up to you to separate the numbers that are trustworthy from those you can’t depend on.
Let us help you navigate these numbers.