Georgi Tsvetanov - Visual Finance: The One Page Visual Model to Understand Financial Statements and Make Better Business Decisions

Visual Finance

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This publication is designed to provide accurate and authoritative information about the subject matter covered. It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

ISBN 978-1518647451

2015 Georgi T. Tsvetanov All rights reserved.

2015 Illustrations by Carolina Sanchez

This publication may not be reproduced, stored in a retrieval system,

or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the author.

To my wife Carolina who supported me unconditionally.

To my son Vladimir who was my inspiration to finish this book. I love you both.

Table of Contents

Introduction

Do you speak the language of business?

Think of a financial decision you recently made: investing in new equipment, changing your insurance provider, opening a savings account, applying for credit - you name it.

Chances are, you analyzed different options to ensure your choice was the best fit for your needs. Recent economic studies, however, show that people lack the knowledge and skills to make intelligent financial decisions. Only 46% of respondents demonstrated an average or higher level of financial literacy.

Economic knowledge is essential both on a personal and professional level. Managing your family finances wisely helps you prepare for hard times and retirement. Making better business decisions as an employee boosts your career and can lead to promotion. As a business owner, financial literacy helps you be more successful and grow your business more quickly.

Accounting is the language of business. Some people such as accountants and CFOs are fluent in this language. However, those without a financial background often struggle to understand that language, and miss opportunities to make timely, appropriate decisions.

In the same way that learning a foreign language opens your mind to new ways of thinking, learning the financial language teaches you new ways of looking at business.

Businesses measure performance in numbers: sales, growth, ROI, ROE, delivery time, and employees commitment. The logic of accounting is virtually the same in every country. After finishing this book, you will be able to understand financial statements even when theyre in a language you dont know, such as Mandarin, German, or Russian.

Accounting is a way of measuring, analyzing, and communicating financial information about a business. It is one of the most exciting business fields. If you are not convinced yet, hopefully by the time you finish reading this book you will be! The way a company manages its assets, cash flow, and costs can mean the difference between success and failure.

What you will learn

This book is for anyone who wants to:

Understand the story numbers are telling.

The company is a complex system that continually evolves. Business acumen will help you understand what is happening.

Recognize trends and warning signals long before problems occur.

Improve your judgment by better understanding the financial impact of your choices.

Understand the connections.

A decision that the sales department makes might affect operations in an unexpected way. Business acumen will help you explore such relationships and minimize potential conflicts.

Who this book is for

Entrepreneur

Grow your business and be even more successful

Do you already have a business, or plan to start or acquire one? The Visual Finance model will help you better understand numbers, understand the changing market reality, measure the value of your company, and compare your company with the competition.

Employee

Stand up to your CFO

Speaking the language of top management will enhance your credibility and provide opportunities for career growth. You will also understand the relationships between different areas of your company and be able to align your efforts with organizational objectives.

Student

Impress your accounting professor

If you are a student, this book will help you understand accounting and business finance quickly and in a more interactive way.

Investor

Compare different investment opportunities

If youre an investor, this book will help you read financial statements more insightfully, and highlight additional information you can take from them. In a dedicated chapter, we will also discuss how to analyze the credibility of those financial statements.

Your role within the company

Different roles within a company have different needs.

Businesses want to sell more, innovate, and have motivated employees, but executives feel the pressure to reduce costs, work smarter, and deal with tough competition from all over the world.

By their very nature, financial analysts tend to be defensive, conservative, and pessimistic. On the other side of the fence are the guys in sales and marketing aggressive, speculative, and optimistic. Theyre always saying, Lets do it, while the bean counters are always cautioning you on why you shouldnt do it. In any company you need both sides of the equation....

If the bean counters are too weak, the company will spend itself into bankruptcy. But if theyre too strong, the company wont meet the market or stay competitive.