Financial planning & analysis and performance management

Financial Planning & Analysis and Performance Management is the essential desk reference for CFOs, FP&A professionals, investment banking professionals, and equity research analysts. With thought-provoking discussion and refreshing perspective, this book provides insightful reference for critical areas that directly impact an organization's effectiveness. From budgeting and forecasting, analysis, and performance management, to financial communication, metrics, and benchmarking, these insights delve into the cornerstones of business and value drivers. Dashboards, graphs, and other visual aids illustrate complex concepts and provide reference at a glance, while the author's experience as a CFO, educator, and general manager leads to comprehensive and practical analytical techniques for real world application.

Financial analysts are under constant pressure to perform at higher and higher levels within the realm of this consistently challenging function. Though areas ripe for improvement abound, true resources are scarce--until now. This book provides real-world guidance for analysts ready to:

Assess performance of FP&A function and develop improvement program Improve planning and forecasting with new and provocative thinking Step up your game with leading edge analytical tools and practical solutions Plan, analyze and improve critical business and value drivers Build analytical capability and effective presentation of financial information Effectively evaluate capital investments in uncertain times

The most effective analysts are those who are constantly striving for improvement, always seeking new solutions, and forever in pursuit of enlightening resources with real, useful information. Packed with examples, practical solutions, models, and novel approaches, Financial Planning & Analysis and Performance Management is an invaluable addition to the analyst's professional library. Access to a website with many of the tools introduced are included with the purchase of the book. Please see About the Website page for access instructions.

Author Notes

JACK ALEXANDER is an experienced CFO and operating executive turned consultant, author, and educator. As the founder of Jack Alexander & Associates, LLC, he provides advice to businesses across a wide range of financial and operating areas, with a focus and passion on Financial Planning & Analysis (FP&A) and Performance Management (PM). The firm also offers customized training and workshops on FP&A. He is a frequent speaker on FP&A and PM. He is the author of Performance Dashboards and Analysis for Value Creation and Financial Planning and Analysis and Performance Management, both from Wiley.

Preface	p. xv
About the Website	p. xix
1 Financial Planning & Analysis and Business Performance Management	p. 1
The Problem with Traditional Measurement Systems	p. 1
Objectives of Financial Analysis and Performance Management	p. 3
Préview of the Book	p. 6
Summary	p. 9
Part 1 Fundamentals and Key FP&A Capabilities
2 Fundamentals of Finance	p. 13
Basics of Accounting and Financial Statements	p. 13
Financial Ratios and Indicators	p. 19
Summary	p. 42
3 Key Analytical Tools and Concepts	p. 43
Basic Statistical Tools	p. 43
The Business Model	p. 59
Summary	p. 69
4 Developing Predictive and Analytical Models	p. 71
What Is a Financial Model?	p. 71
Summary	p. 81
Appendix: Illustrative Model	p. 81
5 Building Analytical Capability	p. 89
For the Individual	p. 90
For the Organization	p. 94
Summary	p. 108
6 Communicating and Presenting Financial Information	p. 109
Laying the Foundation for Success	p. 110
Developing Effective Presentations and Reports	p. 117
Delivering the Presentation	p. 120
Data Visualization and Presentation: A Picture Is Worth a Thousand Words	p. 121
Summary	p. 134
Part 2 Performance Management
7 Business Performance Management	p. 137
What Is Business Performance Management?	p. 138
Developing or Enhancing BPM in an Organization	p. 144
Summary	p. 155
8 Dashboards and Key Performance Indicators	p. 157
Objectives of Dashboards and Key Performance Indicators	p. 157
Selecting Appropriate Performance Measures and Key Performance Indicators	p. 160
Creating Performance Dashboards	p. 166
Sample Dashboards for Selected Industries	p. 175
Summary	p. 175
9 Institutionalizing Performance Management	p. 179
Gaining Traction	p. 179
Integrating Business Performance Management with Other Management Processes	p. 183
Avoiding Common Mistakes	p. 189
Summary	p. 191
10 Measuring and Driving What's Important: Innovation, Agility, and Human Capital	p. 193
Innovation	p. 194
Measuring and Driving Business Agility	p. 204
Human Capital Management	p. 214
HCM Dashboard	p. 226
Summary	p. 226
11 The External View: Benchmarking Performance and Competitive Analysis	p. 227
Analysis of Markets, Customers, and Competitors	p. 228
Benchmarking to Evaluate Performance	p. 232
Using Benchmarks to Set Enterprise Goals for Performance and Value Creation	p. 242
Summary	p. 243
Part 3 Business Projections and Plans
12 Business Projections and Plans: Introduction and Best Practices	p. 247
Overview of Business Planning and Projections	p. 248
Best Practices in Projecting Future Financial Results	p. 252
Summary	p. 266
13 Budgets, Operating Plans, and Forecasts	p. 267
The Budgeting Process	p. 267
The Operating Plan	p. 272
Business Forecasts and Outlooks	p. 277
Summary	p. 301
14 Long-Term Projections	p. 303
Unique Challenges in Estimating Long-Term Performance	p. 304
Applications of Long-Term Projections	p. 305
Developing Long-Term Projections	p. 307
Presentation of Long-Term Projections	p. 319
Summary	p. 325
Part 4 Planning and Analysis for Critical Business and Value Drivers
15 Revenue and Gross Margins	p. 329
Revenue Growth: Key Drivers	p. 330
Key Performance Measures: Revenue Growth	p. 343
Revenue Dashboard	p. 351
Gross Margins and Relative Pricing Strength	p. 351
Measures of Relative Pricing Strength	p. 356
Summary	p. 359
16 Operating Expenses and Effectiveness	p. 361
Drivers of Operating Effectiveness	p. 362
Key Performance Indicators: Operating Effectiveness	p. 365
Tools for Assessing and Improving Operating Effectivenss	p. 382
Summary	p. 387
17 Capital Management and Cash Flow: Working Capital	p. 389
Critical Success Factors	p. 391
Operating Capital Management	p. 393
Understanding the Dynamics of Operating Capital	p. 394
Unleashing the Value Trapped in Operating Capital	p. 396
Accounts Receivable	p. 398
Key Performance Indicators for the Revenue Process and Accounts Receivable	p. 401
Inventories	p. 410
Summary	p. 420
18 Capital Management and Cash Flow: Long-Term Assets	p. 421
Capital Intensity	p. 421
Tools for Improving the Management of Long-Term Capital	p. 424
Projecting Capital Investments and Depreciation	p. 428
Key Performance Indicators for Capital Intensity	p. 431
Intangible Assets	p. 433
Key Performance Indicators: Goodwill and Intangible Assets	p. 434
Excess Cash Balances	p. 436
Long-Term Capital Dashboard	p. 437
Summary	p. 439
19 Risk, Uncertainty, and the Cost of Capital	p. 441
The Time Value of Money	p. 441
The Cost of Capital	p. 449
Performance Measures	p. 458
Summary	p. 461
Part 5 Valuation and Capital Investment Decisions
20 Capital Investment Decisions: Introduction and Key Concepts	p. 465
The Capital Investment Process	p. 466
Evaluating the Economic Merits of Capital Investments	p. 469
Illustrations	p. 478
Summary	p. 484
21 Capital Investment Decisions: Advanced Topics	p. 485
Dealing with Risk and Uncertainty in Capital Investment Decisions	p. 485
Presenting Capital Investment Decisions	p. 499
Capital Budgeting and Rationing	p. 500
Evaluating the Effectiveness of the Capital Investment Decision Process	p. 502
Summary	p. 505
22 Business Valuation and Value Drivers	p. 507
Estimating the Value of a Business by Discounting Future Cash Flows	p. 508
Estimating the Value of Firms by Using the Valuation of Similar Firms: Multiples of Revenues, Earnings, and Related Measures	p. 517
Building Shareholder Value in a Multiples Framework	p. 521
Integrated Valuation Summary for Roberts Manufacturing Company	p. 525
Value Drivers	p. 528
Summary	p. 533
23 Analysis of Mergers and Acquisitions	p. 535
The Acquisition Challenge	p. 535
Key Elements in Valuing an Acquisition	p. 537
Methods and Metrics for Valuing an Acquisition	p. 539
Common Mistakes in M&A	p. 554
Best Practices and Critical Success Factors	p. 557
Understanding Seller Best Practices	p. 560
Key Performance Indicators for M&A	p. 562
Dashboards for M&A	p. 564
Summary	p. 564
Part 6 Summary
24 Summary and Where to from Here?	p. 569
Key Takeaways	p. 569
Where to from Here?	p. 572
Glossary	p. 575
Acknowledgments	p. 585
About the Author	p. 587
Index	p. 589

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Table of Contents