Key management ratios master the management metrics that drive and control your business

What it’s about

Key Management Ratios strips corporate finance down to roughly twenty essential measures and shows, through diagrams and worked examples, how assets, profits, growth and cash flow interconnect to determine corporate value. Rather than drowning readers in equations and exceptions, Ciaran Walsh builds a 'steel frame' of core ratios—return on total assets, return on equity, liquidity, financial strength and valuation multiples—and links day-to-day operating decisions on the shop floor right through to stockmarket valuation. Enriched with benchmark data from roughly 160 companies across the US, UK, EU and Japan, plus chapters on discounted cash flow, shareholder value added and acquisition analysis, the book equips production, marketing, distribution and other non-financial managers to speak the common language of finance and work together toward financial excellence.

The through-line

Who it’s for

A manager from any function—production, marketing, distribution or general management—who wants to understand and control the financial performance of their business.

The problem

Business data on shares, profits, assets and cash flow arrives from many sources but doesn't fit together into a coherent, usable picture for decision-making. The reader feels mystified and intimidated by financial jargon and equations, unsure how the numbers connect or which ones matter.

The plan

1. Learn the three financial statements and the five-box balance sheet structure.
2. Master the two core performance measures—return on total assets and return on equity—and their drivers.
3. Understand corporate liquidity, financial strength and cash flow to avoid running out of cash.
4. Trace how operating performance links through leverage to stockmarket valuation.
5. Apply the techniques to cost/volume/price decisions, investment appraisal, shareholder value and acquisitions.

The payoff

You understand the financial fundamentals of your company and can link returns to day-to-day operations. · You can work alongside colleagues in other functions toward shared financial goals using a common language. · You make smarter management choices, steering both long-term strategy and short-term decisions.

See our guide

• Measure And Steer The Business With Financial Data →

Additional reading

• Creating Shareholder Value · Dr Alfred Rappaport

  The author is mentioned as one of the founders of the Shareholder Value Added (SVA) movement, and the book's chapter on SVA owes much to his initiatives. This book would provide deeper background on the topic.

Featured in these guides

• Measure And Steer The Business With Financial Data →Cited source