3-Minute Financial Analysis for Non-Financial Managers

Occasionally, NFMs engage in critical discussions involving identifying the financial strengths and weaknesses of the external organization, such as deciding whether to extend a large new loan to a client, or evaluating the financial viability of a key supplier, or perhaps more importantly, when evaluating the financial performance of an acquisition target or even the attractiveness of a potential buyer. Such discussions and related activities, particularly those related to merger and acquisition opportunities, can represent pivotal events in the life of the Company and present unique opportunities for individuals to demonstrate their value to the Company. Therefore, NFM’s ability to fully and quickly engage in these discussions may represent positive career development or, conversely, highlight NFM’s limited capabilities and reduce peers’ perception of NFM’s career potential.

Discussion in this article:

Provides an approach to evaluating an organization’s financial reports in about three minutes without the need for other analytical tools, software, or even financial reporting skills.
Provides a general approach by focusing on commonly used financial reporting categories rather than industry specific knowledge.This allows NFM to apply this approach when working with companies operating in unfamiliar industries.
Identifies 12 critical points (including a brief description of what each point means in plain language) that an MFN should look out for when quickly delving into another organization’s financial strengths and weaknesses.
Recommends the order in which these items should be checked.
Provides an example of using this approach using analysis of the 2016 Netflix 10-K report[2]. (Note: All Cash Flow Statement data below is located between pages 40 and 43 of the 10-K Report. The terminology used here is intended to help identify the position of each number in the Cash Flow Statement.(First, because the cash flow statement includes information from both the income statement and the balance sheet, the cash flow statement provides an integrated perspective for looking at the income statement and the balance sheet, rather than the isolated perspective that was second noted.) Eugene F. Brigham and Michael C. Ehrardt, authors of the renowned MBA Financial Management: Theory & Practice: “Some financial analysis can be performed with virtually no calculations.”For example, we always look at the cash flow statement first, specifically the net cash flow from operations. was not involved in any merger and acquisition activity. Normally, neither the income statement nor the balance sheet gives such a clear overview. Therefore, if NFMs do not begin their analysis with a cash flow statement, they may erroneously assume that all of the growth observed on the income statement and balance sheet is organic, which may require further analysis when they receive late information about a business combination . Access to the financial report.